Paul Krugman Crosses the Line

By Gerald Epstein, Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Originally published at Triple Crisis

In his recent New York Times opinion column, “Sanders Over the Edge” (4/8/16), economist Paul Krugman offers his readers a basketful of misinformation on important economic matters about which he should – and probably does – know better. The column contains a large number of snipes and a great deal of innuendo against Bernie Sanders and his supporters, but here I focus on his claims about “Too Big To Fail” (TBTF) banks, their role – non-role, according to Krugman –  in the financial crisis, and Sanders’ understanding of the policy tools available to deal with them. Krugman’s claims about these issues are misleading, almost certainly wrong, and, in my view, call into question the credibility of his New York Times column as a source of economic information and analysis.

Krugman starts here:

“Bernie is becoming a Bernie Bro.” I’ll leave it to others to dissect this one. Moving on:

“Let me illustrate the point … by talking about bank reform.

“The easy slogan here is ‘Break up the big banks.’ It’s obvious why this slogan is appealing from a political point of view: Wall Street supplies an excellent cast of villains. But were big banks really at the heart of the financial crisis, and would breaking them up protect us from future crises? Many analysts concluded years ago that the answers to both questions were no.”

As you can see by following Krugman’s link here, this is not, what Krugman suggests it is: it is not a link to an article quoting multiple analysts presenting strong arguments with evidence that large banks were not responsible for the crisis. It is a link to an opinion piece by Paul Krugman himself. Period.

And, moreover, in this linked piece, Krugman is far more circumspect and uncertain of the answers than if implied in his statement “that many analysts concluded years ago.” So, who are these “many analysts”? On what basis did they reach their conclusions?

Certainly, we can find some analysts who argue (“conclude” is a word that suggests an answer based on a comprehensive analysis of the facts) that the financial crisis was the result of government mismanagement, or was simply a textbook example of a bank run and not due to the actions of large financial institutions per se, or were the result of the decisions of a bunch of sub-prime mortgage providers – like Angelo Mozilo Countrywide Financial that operated more or less independently, and were outside of strict government regulation, that is they were in the “shadows.”

Krugman opts for this explanation: “Predatory lending was largely carried out by smaller, non-Wall Street institutions like Countrywide Financial.” But, you don’t have to have seen “The Big Short” to know that the sub-prime lenders like Countrywide Financial were just one set of  players along a powerful supply-chain that contained  multiple links. This chain was geared toward creating and selling structured, securitized financial products like collateralized debt obligation (CDOs) and CDO-squared’s, mostly produced, financed and sold by the largest (now former) investment banks, J.P. Morgan, Goldman Sachs, Lehman Brothers and commercial banks including Bank of America, Citibank. Contrary to Krugman, the U.S. government authorized Financial Crisis Inquiry Commission (FCIC) reports :

“We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions (italic added) were a key cause of this crisis .… They took on enormous exposures in acquiring and supporting subprime lenders and creating, packaging, repackaging, and selling trillions of dollars in mortgage-related securities, including synthetic financial products. Like Icarus, they never feared flying ever closer to the sun.” (pp. XVIII-XIX).”

The FCIC, thus, puts a central part of the blame squarely on the, so-called “systemically important financial institutions”, which Federal Reserve Bank President Neel Kashkari and former Goldman Sachs banker calls “Too Big to Fail Banks,” and which economist Bill Black, more appropriately calls “systemically dangerous banks.” I have read much of the academic literature on the financial causes of the great financial crisis and I think it is safe to argue that most experts agree with the FCIC and not Paul Krugman.

Paul Krugman, of course, is entitled to his views. But the point here is that it is highly misleading for Krugman to imply that the consensus among economists is quite the opposite of what it is in fact.

Who does Krugman blame in addition to the sub-prime lenders?

“… the crisis itself was centered not on big banks but on “shadow banks” like Lehman Brothers that weren’t necessarily that big.”

This again is highly misleading. First of all, Lehman Brothers was very big indeed. More important, this statement implies that there were “shadow banks” that were involved in the sub-prime debacle that were somehow distinct from the household name Wall Street banks like Citibank, Bank of America, Goldman Sachs, and J.P. Morgan, that Bernie Sanders, Elizabeth Warren and everyone else who talks about TBTF mean.

If these banks were not at the center of the crisis, then why, according the Congressional Oversight Panel , did the massive and “non-shadowy” Citibank get a tax payer bail-out in the amount of  $476.2 billion in cash and guarantees. Why did similarly placed Bank of America get $336.1 billion? “Little Lehman” didn’t bring these behemoths down. Their central role, and those of other TBTF banks – in financing, buying and selling toxic mortgage products put them – and the economy – into free-fall.

Paul Krugman didn’t inform his readers that important economists who study shadow banking do not exclude these massive banks from key aspects of this shadow banking system. Far from it: these TBTF banks are increasingly seen by experts to be at the center of this global shadow finance eco-system.

Krugman similarly misinforms his readers in discussing Bernie Sanders’ command over the details of the Dodd-Frank law and what it has to say about dealing with too-big-to-fail-banks. In a widely reported – and misreported – interview with the Daily News, Sanders was asked how he would break up the big banks. Krugman was only slightly more polite than Vanity Fair Magazine which proclaimed that the interview proved that “Sanders Doesn’t Know Diddly Squat About Wall Street”. Krugman referred to the “recent interview of Mr. Sanders by The Daily News, in which he repeatedly seemed unable to respond when pressed to go beyond his usual slogans.”

To sort this out, let’s look at the relevant part of the transcript:

Daily News: Okay. Well, let’s assume that you’re correct on that point. How do you go about doing it?” (That is: break up the big banks.)

Sanders: How you go about doing it is having legislation passed, or giving the authority to the secretary of treasury to determine, under Dodd-Frank, that these banks are a danger to the economy over the problem of too-big-to-fail.

Daily News: But do you think that the Fed, now, has that authority?

Sanders: Well, I don’t know if the Fed has it. But I think the administration can have it.

Daily News: How? How does a President turn to JPMorgan Chase, or have the Treasury turn to any of those banks and say, “Now you must do X, Y and Z?”

Sanders: Well, you do have authority under the Dodd-Frank legislation to do that, make that determination.

Daily News: You do, just by Federal Reserve fiat, you do?

Sanders: Yeah. Well, I believe you do.”

The relevant facts are these: Under Section 121 of the Dodd-Frank Act the  Board of the Governors of the Federal Reserve has the authority, subject to a 2/3 vote of the Financial Stability Oversight Council (FSOC) to take a range of actions, including (as a last resort) to “require the company to sell or otherwise transfer assets of off-balance-sheet-items to unaffiliated entities”, that is, to shrink the size of the bank in question. Note that the Chair of the FSOC is the Secretary of the Treasury. So, Sanders is correct that the Federal Reserve and the Secretary of the Treasury are the key players here. To be sure, Sanders’ last statement above, that Federal Reserve could break up the banks just by fiat – whatever that means – is not true under section 121.

Still, the Federal Reserve has more tools under its control through Dodd-Frank. For example, under section 619 (one of the key sections outlining the so-called Volcker Rule that tries to ban proprietary trading), states that for these financial institutions “no transaction, class of transaction, or activity may be deemed a permitted activity……(iv) would pose a threat to the financial stability of the United States.” The Federal Reserve would have significant power to issue regulations in this situation.

More generally, the goal of Dodd-Frank, as stated in Section 112 in describing the mission of the newly created Financial Stability Oversight Council (FSOC) is “eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure.” That is, end too big to fail.

In the end, Dodd-Frank does provide tools and responsibilities to the Fed and to the Secretary of the Treasury, along with other financial regulators, that can be used to break up the banks. Sanders’ answer was inelegant, to be sure, but, in reality, his answer reflects the fact that the law is on unchartered territory and in places is vague and would certainly be contested by the banks. So Bernie’s first answer is also the cleanest. “How you go about doing it is having legislation passed …”

In short, Sanders’ answers are way beyond “his usual slogans” as Krugman claims.

Is it possible that Krugman doesn’t understand these points. Seems very unlikely. I cannot begin to imagine his motives, but that is not the main issue here.

What it brings into question is Paul Krugman’s credibility as a New York Times commentator on these issue. Krugman’s credibility does not stem from his political analysis. Krugman is not a Political Scientist. Krugman’s “brand” is that he is a “brilliant, Nobel Prize winning economist.” In fact, much of his early research was brilliant; and, to be sure, Krugman did win the Nobel Prize. BUT, the misleading discussion of economics contained in his piece, “Sanders Over the Edge” does raise this question in my mind: Is Paul Krugman still qualified to write an economics opinion column for the New York Times?

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      I think Krugman is hoping to become Hillary’s Treasury Secretary.

      He has severely damaged, if not destroyed, his credibility.

      1. Robyn

        I figured out right away that Krugman was promised a cabinet post, just like Hill was promised something like that if she stopped her campaign against Obama. Also Krugman’s wife is running for office with Hill’s support, as is Chris Matthews’ wife. No behind the scenes manipulation here, no secret agreements.

        1. Kimmer

          Really, Krugman’s wife is running for office ?? I never heard of that.

          What position and where ?

  1. johnnygl

    Gerald Epstein is right to ask hard questions of krugman’s whoppers. It’s worth asking how far the NYT editors will let him go with whoppers like the ones he’s throwing out there in order to continue supporting HRC at any cost. How far is too far for Krugman and the editors?

    The corp media have shown just how far they’ll go and it’s not pretty.

    1. diptherio

      On the one hand I get it. On the other, this article annoys the heck out of me by implying that Krugman has any credibility left. Anyone who’s been following him has witnessed his school-yard bullying of MMTers (despite having his @$$ handed to him, intellectually), and quick retreat to ad hominem attack of anyone who disagrees with him. He’s a wonk, and anyone with a different opinion is just stupid, according to Krugman. So it’s a little absurd to read Gerald now fretting that he’s losing his credibility. What credibility?

      And no, I don’t expect the NYT to reign him in anytime soon. They are a propaganda organ, pure and simple — truth is beside the point.

    2. Tom Allen

      Considering that the Times also publishes Tom Friedman, Ross Douthat, David Brooks, Maureen Dowd, and other Establishment hacks, I’d say Krugman’s definitely found his niche.

      1. R Zimm

        I think it unfair to include Dowd (bitingly humorous) and Douthat (unusually inciteful as a conservative as viewed by me, a liberalish) in the same category as Brooks and Friedman who are inaccurately assumed to be “brilliant” because they are in the NYT.

        1. FunkNjunk

          Weeelll, Maureen Dowd is an unfunny, ridiculous human being who brings her own numerous pathologies to her “writing”. She loves to call into question the masculinity of male Dem politicians because of those pathologies, and sells it as snark. I recall the Al Gore ” earth tones ” writing … No… She sucks ass.

          1. bob

            Her eating too much pot food gave some of the best insight into her.

            Her biggest fear was not of being dead, but of being dead and no one had told her.

            I’d pay to send her back to CO.

    3. redleg

      Sanders is an anti-establishment candidate and Senator. The NYT is part of the establishment.

  2. craazyman

    Don’t worry . Once Bernie gets elected in November Professor Kelton will take over PK’s column. PK will be banished to the library stacks the way Augustus banished Ovid to the Black Sea and he’ll spend his days reading dusty hard copy books by 19th century economists at some wooden desk stuffed behind rows of bookshelves to pass the time until he goes home in the afternoon. No more limelight! It will be a life of dust and disappation. The spotlight will be on Professor Kelton and wow will it be bright. It’s kind of hard to imagine, right now, just how people will react when they read that stuff about MMT. They’ll think she’s making it up! They’ll say “This isn’t science! This is madness!” That’s how lost they are right now. They actually think PK is a political scientist. They seriously believe economics is a political science. If it’s a science, then where’s the laboratory? Show me the lab! Every scientist has a laboratory. OK, they’ll say the whole country is a laboratory. And they’ll say you’re a lab rat. That’s you reading this! Don’t think you’re above being a rat. Well they won’t actually say that, but they’ll think that. They will. Sitting there in the university office or the think tank. You’re an object of experimentation by a scientist of society so the natural laws of perfection can be deduced with a mathematical rigor that neutralizes all doubt and ends all discussion. Then things will be perfect, forever. And then you won’t be a rat anymore. It’s something worth looking forward too, anyway, even if it’s a bit rocky between now and then with all the experiments. Sometime’s there is a feeling of guilt and regret when the experiment doesn’t work the way it should, but that’s usually because the rats fukked it up.

    1. craazyboy

      Microeconomics deals with individual rats. Macro uses FRED The Rat. In Macro, all else is considered anecdotal rat squeaks.

    2. Jim Haygood

      Indeed, most of us are rather looking forward to the whole country adopting the free-wheeling UMKC ethos of “free money, free beer, free love.”

      Except for the hairy-handed Krugthulhu, muttering darkly about “hippies” as he rifles through the dusty stacks of the self-help section searching for William J. Clinton’s notorious tome, How To Become A Gigolo.

      1. Chauncey Gardiner

        Yes, I agree. That the distribution of free money has been limited to such a few recipients is one of the great crimes of our era, and there are many.

      2. Plenue

        You just love strawmen, don’t you? You damn well know that isn’t what the UMKC people say.

        1. bob

          Jim’s got a form of Tourette syndrome. Outbursts of reactionary politics at random times. He can’t help himself.

        2. zapster

          Well, depends on how you define ‘free money’. Money created and spent by government doesn’t have to be paid back at interest, and that’s *exactly* what we need a lot more of. That is certainly ‘free money.’

  3. Vikas Saini

    My only problem with Friedman’s piece is that it reinforces the prejudices of the intelligentsia with its unspoken assumption that having a column in the NYT requires a level of “credibility” that is wanting, and by insinuating that if Krugman is “not qualified” for the NYT, someone else would be — leaving the credibility of the NYT untouched. Seems clear that for the NYT Krugman’s approach to Sanders is not a bug, its a feature.

  4. drfrank

    Yeah, well, if Bernie wants to be the Pres he’s gonna have ta figure out how ta disarm the ordnance coming in from the surrogates (and later the Republican clowns) before they land, and even before they are fired. How exactly to do what needs to be done re the banking/financial system? That is, in my opinion, a very good question.

    1. Norb

      Bernie doesn’t have to, fellow citizens demanding an end to this madness are responsible for disarming the propaganda hurling in form all sides. The BS and Lies are so thick it is almost beyond belief. We are entering the sky is green category. Turning away from the propaganda is the first step, playing an active role in combatting it the essential second. Start with yourself- then everyone you have some influence with. That is the formula for building strong organizations. Self-family-work-community.

      Demanding more of leadership requires responsibility. Instead of wandering like sheep waiting to be herded by some benevolent shepherd, civic duty must be exercised. Stop electing corrupt crooks for one. Stop supporting corrupt businesses with your patronage. Move your banking requirements to less corrupt institutions. Yes, all seemingly insignificant, but essential.

      Politics requires activism. Instead of endlessly debating the right and wrong of PAST phenomenon, its time to take ideas that have been proven effective through experience and implement them in our lives. One of my favorite quotes is form Wendell Berry, an author I greatly admire for his wisdom and view of the future. He states,”Eating is an agricultural act” What you eat determines and has great influence on the social system that provides the food. The individual chooses to be a passive or active participant in that system.

      Krugman’s obfuscation on the nature of the financial and banking system illustrates the fragility of the current system. It survives because the population supports it- is fooled into supporting it. Directing the power of banking and finance to building a strong and just society begins by taking control of where our money goes.

      1. sd

        Thank you for that. Thought provoking. Micro politics.

        Eating is a political act.
        Sex is a political act.
        Shopping is a political act.
        Working is a political act.
        Kindness is a political act.
        Peeing and pooping are now political acts.

        This reminds me of seeing the world as needs vs wants. You need to eat but you want chocolate cake is about making choices. Seeing eating as political is a great reminder of intentional consequences.

        1. Montanamaven

          Yes needs v wants! Edward Bernays was hired after WWI to change Americans attitudes from what they needed to what they wanted. And changing to what we wanted then demanded the use of credit and lay a way plans. It was the real beginning of the age of me and not the age of we through incessant propaganda/marketing. Usury laws kept some of the debt at bay. Then, in the late 70’s those laws were changed. Yes, by Democrats. I remember reading an article in Harper’s called “Infinite Debt: How Unlimited Interest Rates Destroyed the Economy” By Tom Geoghegan, A Chicago Labor lawyer and historian. Made a big impression on me. Here is an interview with Amy Goodman:

          With the end of wage increases in the 1970s came the ability to make up the difference with credit cards. Not such a good idea it turns out. It should be all about wage increases.

          That is what Bernie should really emphasize about banks, credit cards, college loans. Bring back the Usury laws that have been in place since Biblical times and raise wages.

          1. Norb

            What would happen to the system if people started rejecting the idea of using debt in order to survive? Stop using credit cards. Learn to do without. Relearn patience and fortitude. Practice self-suficiency. Strong businesses that actually provide quality goods and services would survive and flourish. All other weak actors would perish as is right and just. Debt brings out the worst of the human condition. The wisdom of the ages in outlawing usury become clear. Another example of how wisdom and progress are not the same thing.

            These are all self evident outcomes for those of us who see the danger clearly. But how to protect the weak? This seems to be the lever point that the elite always exploit to the fullest. If there is no consensus on how a just society should function, you reach a stalemate position. The exploiters maintain their leverage while the multitude lack the power to institute change.

            The debt question is the contradiction that will bring about a crisis situation. The contradiction is building social structures on unsound ground. Like constructing a building on a sandbar, the structure will eventually collapse. Pushing public policy based on maintaining individual debt levels is a loosing strategy if individuals refuse to take on the debt. In the short run you will acutely feel your poverty. But such a state might lead to longterm prosperity and more stable social structures.

            The work is convincing people that this is possible in the first place.

            1. JTMcPhee

              My grandparents, who lived through the Depression, had a little mantra that they drummed into me and my siblings, and their own kids before us:

              Eat it up.
              Wear it out.
              Make it do.
              Do without.

              Positively unAmerican, eh?

              By the way, my dad’s dad did okay job-wise during the Depression because he worked for a company (now long absorbed and forgotten) that made shoe care products. Shoe polish and brushes, waterproofing, half-soles and heels, laces, stuff like that. Of course the shoes people bought back then (limited to only a pair or four per person) were made of good stuff, crafted by craftsmen, intended to last for years and years of hard use. Compare the sh!t one can buy these days from places like this,|%20Competitors%20|%20Desktop%20%281013%29, to fill up those shoe closets that those Dream Homes ™ all have off the Master Suite, on and on. This is what we are supposed to call Freedom ™, I understand…

              And my dad’s parents owned a duplex (up and down) and ran their summer house as a half-year bed and breakfast, and when they went to FL in the winter to gather shells for the shell jewelry Grampa Clem made, he also walked the streets of Hollywood looking for storefronts that could benefit from his marketing artistry. Now we got Airbnb? And Grannie Pods? Of course how many people are actually going to avail themselves of, or be able to afford, this adventure in extended-family living?

              What it took, to keep up appearances for Grammy Sadie’s wants…

              1. BradK

                Poverty in America today is defined as having to make do with last year’s iPhone. Oh, the indignity.

            2. Pavel

              “Live within one’s means”… how radical is that?

              I recall a WSJ article from 4 or 5 years ago regarding different attitudes towards credit cards and debt. They compared the fairly typical (or stereotypical) young NY woman with a dozen pairs of shoes and going out to bars and dinners and engaging in “retail therapy”, always paying by credit card with a young German woman who lived fairly frugally with a modest wardrobe and only used her (single) credit card in emergencies.

              More important perhaps than the individual cases is the national one — the USA is officially $19 trillion in debt, and has another $40 trillion or so in unfunded pensions, social security, etc. Talk about living beyond one’s means! Of course if they didn’t spend all that damn money rebuilding the infrastructure, providing decent health care, running the world’s best education system… oh wait — the US pisses away a trillion a year on “defence”.

              1. bob

                19 TRILLION!

                Law of large numbers- They’re bad.

                Since we’re putting numbers to things, why not assets? What’s the US worth? Lots of land, lots of buildings, lots of natural resources….

                1. Skippy

                  Liabilities of the United States as a fraction of GDP 1960-2009.
                  The financial position of the United States includes assets of at least $269.6 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP) [a] as of Q1 2014.

                  2016 Z. 1

                  [PDF]Financial Accounts of the United States –

          2. Norb

            Just watched the Tom Geoghegan link- Thanks. Tom is new to me so I will look up his work. Sounds like an individual interested in social justice and fair play. Refreshing to hear a sane voice interested in educating fellow citizens in how the system works. I’m from the Chicago area, a cesspool of corruption and backroom dealing, so even without knowing Tom’s history in politics he was probably eaten alive in 2009 for his views.

            One point he talked about was businesses exploiting unsecured obligations. This to me is the main stumbling block preventing common people from protecting themselves form the predators of todays leadership and business elite. The level of trust afforded to todays leadership in honoring obligations is misplaced. Pledges, whether pension obligations or job guarantee promises must be secured in some unbreakable fashion. Failure to honor these obligations must result in some form of social cost. Currently, all costs have been born by the poor and working class with the elite receiving a free pass.

    2. Kurt Sperry

      I think the difficulty of getting large parts of Bernie’s agenda done is very likely vastly overrated. Looking at it as “look how much trouble Obama had trying to get anything done in the face of Republican stonewall opposition, how will Sanders’ far more ambitious agenda ever even get any initial traction?” is fundamentally a politically naive one. The Democrats “fail” because in most cases, that’s actually the plan. There are an impressive list of policies we’ve seen again and again in the polling data that Americans strongly support that have no advocates in either party. Single payer: can’t do that, the Republicans will never be on board, cutting the military: can’t do that, the republicans again, endless wars: same, protecting American workers from direct competition with third world labor: same again. The list goes on, those are just ones off the top of my head. Those things aren’t happening primarily because of Republican obstruction, those things are happening because both they *and* the Democrats are bribed and corrupted to see that the will of the electorate is thwarted. Because nobody in the political mainstream forcefully advocates for these many popular ideas, there is no cost in political capital to be paid. The entire dynamic is changed if even one major political player won’t play along.

      Imagine an administration that called out not only the Republicans, but the Democrats on these issues where his positions poll 20+% higher than those against them. Sure, they can fight them, sure they can initially block them with their legacy numbers, but it’ll cost them in political capital in a way it never has with the duopoly keeping them off the table. And every time Sanders or another populist strongly presses on those issues with overwhelming public support and makes a public stink, his political capital grows and the obstructionists’ is chipped away. Every political battle strengthens him and weakens the other side, all he need do is hammer away relentlessly. It’s a war that the obstructionists are preordained to lose–and not just on the individual issues either, but the constant attrition of their political capital being forced to take hugely unpopular stands, it even erodes the very political foundations they sit atop. The bigger, bloodier and more numerous the battles, the more it breaks the machine.

      1. Norb

        Obama and the Democrats valiantly fighting for the common man in the face of Republican resistance is a meme whose staying power is remarkable. It survives only because of the propaganda machine and the desire of most people to avoid physical hardship. Directly putting oneself in the line of neoliberal fire is avoided and magical thinking is the last vestige of the majority. Hard reality crashes down when the myths can no longer be believed or the laws of environmental degradation play out to the end.

        It seems like the old days of physical confrontation are returning. It is the choosing of sides in the coming confrontation that we are witnessing today. I think the elite are so smug because they welcome the physical confrontation to come. They believe there is no way that they loose.

        How long has slavery existed in human societies? In one form or another, for a very long time. Resisting the domination of one group of people over another is what we are facing- and alway have. That is the promise of freedom brought about through democracy. Breaking the machine is one thing- successful rule is another. Without a clear understanding of the social goal, and a means to enforce that vision, the way is open for the Alphas to dominate.

      2. redleg

        Any president can direct the resources of the executive branch to implement policy independent of congress. How?
        Direct the DOJ to prosecute/ignore certain crimes. Direct the FBI to investigate specific things such as terrorism. Use federal contracts to champion domestic policy (wages, minority owned businesses, etc.). Appoint judges that hold a particular secular opinion on certain legal issues like Citizens United. Direct the State department to focus on a particular foreign policy. Exercise control over the military by firing insubordinate generals (e.g. MacArthur). Etc.
        The executive has all kinds of options available that are independent from congress that require nothing but the will to exercise those options.

      3. Jeff W

        Because nobody in the political mainstream forcefully advocates for these many popular ideas, there is no cost in political capital to be paid. The entire dynamic is changed if even one major political player won’t play along.

        Imagine an administration that called out not only the Republicans, but the Democrats on these issues where his positions poll 20+% higher than those against them.

        I agree with that completely.

        (1) If these positions are never on the table, they never get acted on. If they are on the table, they can—and do—get acted on (e.g., the $15 minimum wage).

        (2) The arguments against some of these positions are ludicrous and collapse immediately on even a cursory inspection. Against “socialized medicine” or “single payer”? How about disbanding the Veterans Health Administration or doing away with Medicare? Concerned about “family values”? Why is the US in with Papua New Guinea and Oman as the only countries in the world that no paid-maternity leave? It’s not that those favoring those positions have been “losing the argument”—almost no one in an official position of power (with the exception of someone like Bernie Sanders) is making the argument.

        (3) Large majorities of people (as you said >20% majorities) support these positions. The political “revolution” is really only that the espoused “majoritarian electoral” politics—where policy tracks what the most of the people, as opposed to the élites, want—more closely aligns with reality. That’s hardly radical—that’s the way things are supposed to work. That the argument that such a view is not “pragmatic” even has any legitimacy shows how normalized our current state of oligarchy is. What are people like Clinton and Krugman saying, even if you buy their premises? “It doesn’t matter if that’s what you want—we all know that’s not possible” It’s actually chilling—the “forces arrayed against us” are “too powerful.” Why even have an election? (And why vote for a party that portrays itself as so stunningly ineffectual?)

        (4) Some battles do take a lot of time; not every battle does. Over 70 years passed from the time people met at Seneca Falls, New York to talk about women’s rights to the passage of the 19th Amendment giving women in the US the right to vote; a little over three months passed between the time the 26th Amendment, lowering the voting age for US citizens to 18, was passed by Congress and the time it was ratified by the states. In 2012 Jamie Galbraith was giving $12 an hour as a “very substantial amount” in talking about a minimum wage; just four years later, $15 an hour is the baseline. It’s basically irrelevant to argue that positions are not “realistic” now—you advocate for these positions on their merits so that they become realistic and, eventually, reality.

        1. Lambert Strether

          Since corruption is pervasive, “getting things done” requires corrupt dealings. That, in essence, is the Clinton message.

          “Pragmatism” about the resulting “hard choices” is there as cover for those who wish to blind themselves to this, Upton Sinclair style.

      4. August West

        Yes all of this. Bernie boils all that down into his message, get money out of politics, overturn Citizens United and if the American people back him he will be able to get things accomplished just as you say above. Question is, are low information voters or Americans who don’t pay that much attention to politics inferring all of that from his simple message?
        I’m not sure. I think Bernie needs to start expanding on his stump speech themes.
        Hillary seems like an easy and safe choice to people just because they are familiar with her.

    3. zapster

      This is like demanding that the captain of the ship know how to run the warp drive himself. We don’t need such a leader, we need one that is willing to say “Make It So.”

  5. Si

    I am not sure why the ‘hoo harr’ about Krugman crossing some line or other. He has never been more than an academic shill supporting the vested interests who play to his vanity.

  6. James Levy

    Krugman’s claim to fame is that he is a top-flight academic expert. When you are an academic expert you are supposed to be in an ongoing dialogue with your colleagues as you collectively grope towards an understanding of the world around us. Krugman’s sin is that at some point he became “too big to listen, too big to correct.” He made a fool of himself ignoring the patent fact that securitization of mortgages, and the sleazy way they were securitized, turned an S&L style/size mess into a global disaster. Without securitization we would have known how much bad debt there was and who held it. With securitization, the whole mess was systemically disbursed to the point that no one knew how bad it was and which companies were holding the bad debt, so the assumption ran that all the debt was bad and thereby the world credit system threatened to seize up. These are facts that anyone who knows what happened in the Fall of 2008 MUST know. But Krugman no longer listens, and is too arrogant and tetchy to permit correction. Even more than a shill, Krugman is now an ivory tower hack, determined to ram his opinions down everyone’s throat and damn the facts or evidence (facts and evidence being, of course, for the “little people” who don’t hold Chairs at Princeton).

    1. Skippy

      Did some one say Princethon…

      Old Harold of the Woodrow Wilson School of Public and and international affairs…

      The EU defining problem is its monetary union without a fiscal one, which has created an environment where public budgets are strained.

      For a historian this was a pearl…

      “A better approach would be to reverse the exodus of the young through better policies, as Ireland did in the late twentieth century, with rapid economic growth leading many of the skilled workers who had left in the 1980s to return – and spur even faster growth. In order for such a reversal to take place, however, young people’s countries of origin must become more open and more innovative – no small feat, especially when the elderly are in political control. In short, there are many feedback loops that make the gerontocracy self-reinforcing.”

      What part of history did he sleep thought leading up to the crash of Ireland brought on by whoring it self out to multinationals, whilst feeding an epic C/RE boom only to goes bust and then stick the citizens with the bill w/ a huge dollop of austerity for their troubles….

      Now he want them and everyone else to swallow the rufie again and spread legs only to awake some time latter with a sore bum…. then the Conservative can say they brought it on themselves… twice… silly buggers…

      skippy…. gerontocracy – ????? – personally I like the old terms cull… ones company thingy…

    2. jhallc

      Are you saying he’s become “Larry Summers”. To complete the transition all he needs now is to become Secretary of the Treasury. He seems to be working hard on that.

    3. fresno dan

      James Levy
      April 9, 2016 at 8:24 am

      “too big to listen, too big to correct.”
      Absolutely terrific line!

    4. Chris Sturr

      I think this (James Levy’s post) gets exactly at what Epstein’s point is, as several other comments here do not. The credibility/non-credibility of the Times or other Times columnists is not to the point, nor whether other economists agree with him on one matter or another. Crossing the line in this case is about his just completely ignoring the shared understanding of the financial crisis that most academic economists have come to in his arguments against Sanders.

  7. Rodger Malcolm Mitchell

    Somehow Krugman won a prize, mischaracterized as a “Nobel prize.” His meanderings about economics fall somewhere between laughable and criminal, and day after day, he demonstrates total disregard for facts. Here are a few articles in that vein:

    Krugman proves America never will have Medicare
    O.K., I was way, way wrong about Paul Krugman
    “Framing” has brainwashed America, but Krugman will save us.
    –Tricky Paul Krugman, still no cigar.

    In short, not only is Krugman wrong, again and again, but he is inconsistently wrong, often disagreeing with himself.

    He’s a clever writer but he is no economist, as he demonstrates time and again, he doesn’t understand even the fundamentals of Monetary Sovereignty.

    1. Benedict@Large

      He’s started to understand monetary sovereignty, thanks to the MMT crowd, but he gives them no credit for this because they are beneath him. As long as your sources are your lessers, Krugman believes, there is no need to use quotation marks.

    2. Jim Haygood

      I would be pleased to serve as your second, if a duel can be arranged at high noon on the Central Park Sheep Meadow.

  8. Paul Tioxon

    Paul Krugman joins the false prophets on the right of climate science denying in denying the widely held, if not nearly unanimous conclusion about the critical role of systemically dangerous banks who are dangerous not because they do dangerous things, but because of the scale of their financial activities are so far reaching. Paul Krugman does not understand the most simple sociological analysis of power, in this case, economic power residing in its extensiveness and intensiveness.

    That Countrywides or Ameriquests were not by themselves, financial service organizations large enough to create the world wide financial disruption. Nor were they powerful enough with the intensity to command a vast array of partners such as ratings agency, to turn toxic subprime mortgages into AAA Gold! That they are representative of the innovation of mortgages that are first originated, seasoned for a a few months while they are bundled up, aggregated into a pool of loans large enough to be sold by the market making Wall St banks, such as Lehman Brothers, or JP Morgan, insured against most certain losses by AIG’s credit default operation in London’s City, its financial center. Krugman is denying that the originated loans, passed from the World Savings and The Countrywides of the banking market onto the Wall St banks who combined into larger pools of loans, conventional loans with actual underwriting to credit worthy borrowers, in tranches, thinly layered dollar amounts of notes so toxic that by themselves they could only exist in diluted form with higher quality credit loans in much greater dollar amounts.

    And all of this, with so much in origination fees, junk fees charged at closing and at rates of interest so high, that the yield spread premium, the value of getting a mortgage note at double digit interest rates, provided such a money making proposition that the high volume of origination in the $Trillions of dollars of these loans was absorbed at an ever increasing velocity of demand by the only financial organizations large enough and with the extensive placement reach for annual amounts that crossed first, the 1 $Trillion mark, and the next year more $Trllions until the literal demand for more from Countrywide and others became so shrill from the Wall St market makers for these loans, that underwriting simply stopped being an active part of the process and loan applications were simply waved through, sent to closing, and packaged together as quickly as possible for the insatiable demand.

    That to deny this system was created by the capacity of big Wall St banks to turn what originated at the smaller banks into the large scale market for subprime loans, is to deny the actual process of finance as it operated and finally collapsed. This makes Krugman a leading Too Big To Fail denier, as stupid in his claims as climate change deniers whose eyes are, the words of Sen Warren, “Stitched Shut”, for failing to see the connections extending out from the TBTF banks down to the tributary of loan origination operations who no longer hold onto the loans they grant and outward to the failure of the Wall St ratings agency who blessed the mess in order for the AIG credit insurance to be granted that made it all an Investment Grade derivative pool for sale from the big banks by means of their extensive brokerage operations to the public at large.

    If not for the Too Big To Fail banks capacity for absorbing these loans and then reselling them to institutional investors who sold them in turn to many on Main St, without this vast network of distribution at the end, and power over their connections to Moody’s and Standard and Poors for ratings approvals, vast hordes of cash in the $Trillions to replace the subprime loans originators, none of this would have come to pass. Too big, creating too powerful to be said no to, too widely connected to keep the fallout to just the shareholders and management, too long without regulatory oversight that would have kept this from going to the scale of systemic is too much to deny. Amazingly, Paul Krugman is too blinded by the ambition he reflects for his Democratic presidential hopeful, to see that the whole capitalist world only comes to a screeching halt from the commanding heights of capitalism, not from its sub-alterns. Paul Krugman’s rants and raves in the vain hope that some voters will hear his voice as the voice that once was the substance of reason, now only the sounds of desperation of a creeping doubt that political victory for the awesome power of the White House may be slipping away.

    1. PrairieRose

      Methinks we’ve found a replacement for Professor Krugman. This is the most succinct, best summation of the Great Financial Disaster I’ve read. Brava. And thank you.

    2. fresno dan

      Nice analysis.
      The only question I would proffer is if Krugman is really that misinformed – I think Krugman is simply willing to dissemble, misstate…O why beat around the bush – LIE to try and win an argument.

    3. Alex morfesis

      Let us not dumb down this argument (no not defending krugz dui) but Countryslyde was a fed primary dealer…not just the mafia lending store above the butcher(& bookie) in the bronx…
      Mozilo ran wild when he helped create basel 2 compliant capital to help german expansion into eastern europe and no one complained as they all made money from prefunded securitizations…ask why so many german landesbanks were being allowed to guarantee ninja loans in securitized trusts ? And why senator chuckee from ny only noticed “countrywide” had a problem in march 2008 but has never once mentioned(that I have found) any noise about how wall street made maybe an oops…
      But krugz is doing maybe his own kphahb…certainly gets more klyx by saying obviously stupid thingz.

    4. polecat


      “Say it again Paul”…….”SAY IT !”

      there will be bloodied reputations

  9. ltr

    Paul Krugman and Brad DeLong are frightening bullies; frightening because these are academics and any student studying with either professor has to understand that failing to agree politically could a dangerous career-wise. I would never risk having such a professor grade or advise me unless I knew I could imitate every view they had.

    1. Lambert Strether

      I don’t like the “bully” formulation a whole lot. That said, DeLong will admit he’s wrong. That puts him in an entirely different category from Krugman (I almost wrote Friedman, but of course the Krugman and Friedman are quite different; Krugman’s wife didn’t own a whole bunch of shopping centers).

      1. TK421

        Krugman denies reality when he has to. I’m not sure Friedman knows what is real and what isnt.

      2. ltr

        I appreciate the explanation and differentiation from DeLong. Also, I did not know which Friedman you were referring to for awhile.

        Thank you.

      3. Foppe

        DeLong will do so on certain issues but not others, depending on how important they are to his overall outlook. Look at his exchange with David Harvey from a few years ago; it was cringe-worthy.

  10. Watt4Bob

    The media as a whole has jumped the shark over the increasingly obvious fact of Sander’s momentum.

    Did anyone else witness Charlie Rose go off the tracks last night?

    His ‘interview’ of Sanders was painful to watch.

    However, I think Sander’s observation is spot on, his momentum is un-nerving a lot of people whose livelihoods are rooted in the current regime, and they are loosing their marbles over the prospect of real change, and as he says; “They’re getting nervous”.

    1. MikeNY


      PK getting crazy shrill, The Big Dog losing it with AA protesters… races in NY, PA and CA tightening up.
      As PK revealingly wrote, it’s not “cute” anymore. This was supposed to be a coronation.

      1. voteforno6

        I actually don’t think that Bill lost it…he was just talking to a different audience than those protesters.

        1. Lambert Strether

          A Sister Souljah moment. Even if that was WaPo’s take, I agree. Clinton’s got to tack to the center for the general, so that means throwing those pesky early supporters under the bus. So she has Bill do it for her.

    2. fresno dan

      April 9, 2016 at 9:23 am

      I HAD to vent last night – I was about to go Apoplectic

      fresno dan
      April 8, 2016 at 7:43 pm
      So I’m watching Charlie Rose (I’m watching Bloomberg, but I guess this is a CBS morning show interview???) – I could only stomach 15 minutes. And Charlie is supposedly the wise, the sober, the decorous, the “serious” people’s media interlocutor….. SERIOUSLY, Charlie SHEEN would have done a more significant, informed, relevant interview with more insight…
      Anyway, ALL Rose can talk about is how the “tone” has changed, and will Bernie stop beating his wife…er, I mean Hillary? And why oh why can’t Bernie admit how qualified Hillary is???
      No deflection by Bernie to employment, health insurance, inequality…ISSUES, could deflect dear Charlie from bewailing the state of our “attack” politics ….s Gila monster could not stand clamped on something as tenaciously as Charlie kept on how Bernie!!!! has gone negative!!!!!!!

      I almost had a stroke, and I really can’t afford to buy a new TV should I put my foot through it.
      And the media wonders why no one buys newspapers or watches TV news….

      and I’m saying this as somebody who does not view Bernie as an angel from heaven. Great Flying Spaghetti Monster, Pravda was a better truth teller than the US mass media. Admit it Sarah Palin critics – she was absolutely right on the media!

      1. John Wright

        For a twofer involving Charlie Rose and Tom Friedman, see a snip from Charlie Rose May 29, 2003.

        As I remember from viewing the full show Charlie listened to Friedman’s “Terrrorism Bubble” explanation without rejoiner.

        Here’s a clip, unfortunately without the continuation into Rose’s lack of follow up.

        This has Friedman saying “American boys and girls going house to house from Basra to Baghdad and saying which part of this sentence don’t you understand… well suck on this.”

        I had already discounted Friedman prior to this show as he pimped for the Iraq war, and after this interview, I avoided future Charlie Rose interviews.

        View the clip, it is possibly Friedman at the pinnacle of his most arrogant, self-assured and self important moment.

        And Rose at his “don’t burn the guest with embarrassing questions as we might want him back” behavior.

        1. bob

          “For a twofer involving Charlie Rose and Tom Friedman”

          Woah. Wost porno ever. Stop that right now.

      2. Detroit Dan

        I also saw that Charlie Rose interview with Sanders. Yuck. I’m glad you posted about it. I really had a hard time believing what I was seeing. It was as if Sanders was singlehandedly removing all decorum from American politics.

      3. Elliot

        Charlie Rose thinks of himself as an elder statesman, but he’s just a pushy rightwing guy with a big contact list and a nice table.

        As a person who watches not much tv but mostly public tv (as there is no other out here in the mountains)….. I’ve seen a lot of Rose over the years. I used to put up with him because of the artists & critics he’d have on, but those have dwindled compared to finance & rwing darlings. So now I rarely watch him.

        I’ve long discounted Krugman because anyone who’s on Charlie Rose that often is no friend to the 99%.

        And I was pleased to see Bernie stand up to Rose and tell him to stop interrupting him; interrupting, putting words in peoples’ mouths, is Rose’s stock in trade and Bernie withstood him better than most people do. So while Charlie was infuriating, he didn’t clean the floor with Bernie though he must have been trying.

        Yesterday, Bernie was on The View, and they loved him, even the libertarian person was pleasant to him, and they asked to have him back on. (I’ve only seen that show a few times but it seems like it might be prime Hillary voter viewing? TV on in the home during workday hours, for women.)

  11. Skip Intro

    Where by Nobel Prize in Economics, you mean special Swedish prize bought by a pseudoscience with physics envy.

    1. R Zimm

      I love NC’s use of the term “soi disant” before Nobel Prize in Economics. Should become de rigueur in all uses of the NPiE phrase.

    2. Foppe

      To be honest, the chaps who give out the other nobel prizes are barely any less reactionary/status-quo-reinforcing; you just notice it less because the other fields are less politically relevant.

    3. Skippy

      Key member of Swedish Academy of Sciences calls for immediate suspension of the “Nobel Prize for Economics”

      Bo Rothstein, an important member of the Royal Swedish Academy of Sciences, has today in Sweden’s most widely read newspaper called for an immediate declaration of a moratorium on the awarding of Sveriges Riksbank Prize for Economics in the name of Nobel and the Nobel Foundation.

      Rothstein’s article argues that today with increasing success, economics as commonly taught in universities and endorsed by most winners of the economics prize promotes corruption in societies around the world. Therefore he concludes that the Nobel Foundation’s awarding the economics prize is “in direct conflict with what Alfred Nobel decreed in his will.”

      “I will,” writes Rothstein, “therefore now take the initiative in this matter.”

      Below is a Google-translation of Rothstein’s article. If someone can provide us with a better translation, we will post it.

      The Prize in contravention of the spirit of Nobel’s will

      Can contribute to increased corruption. Multiple independent research shows that those who study economics are more prone to corruption. And the behavior seems to be an effect of education. A price that risk contribute to increased corruption in the world is in conflict with the spirit of Nobel’s will, writes political science professor Bo Rothstein.

      Recent research has shown that corruption is a broader social problem than previously considered case. When comparing countries, finds research negative effects of corruption on almost every measure of human welfare such as infant mortality , economic prosperity , life expectancy, the number of children living in poverty , access to clean water , the number of women who die in childbirth , willingness to fix environmental problems and more. Corruption has also recently been shown to be an important explanation for both the civil war between the states.

      Furthermore, the corruption also have strong links with more subjective measures such as the extent to which people consider themselves satisfied with their life, consider themselves to be happy and to what extent they believe they can generally rely on other people. Although measurements of the degree of corruption in various countries are associated with certain difficulties can well appreciate that more than seventy percent of the world population lives in countries with dysfunctional social institutions. This means that in itself is not lack of capital, skills or natural resources is the main problem but precisely corruption in public institutions.

      There is of course no modern societies that are free of corruption, such a thing would be as utopian as a society free from crime. However, it is important to point out that widespread corruption is by no means something that only exists in developing countries. Several analyzes of, for example, Greece and Italy’s economic problems, pointing out precisely corruption as a root cause. There are also analyzes indicate that financial market collapse in 2008 can be explained in terms of corruption. As well as the level of crime, the degree of corruption among different communities. Societies that have comparatively low corruption usually most measures, to be countries in northwestern Europe as well as Australia, Canada and New Zealand. Compared with neighboring countries cope Botswana, Chile and Estonia well.

      The causes of corruption are manifold, but a surprising result is that the population in countries with severe corruption is by no means internalize this behavior as part of their culture. On the contrary, they take in general strongly reject such behavior, and they also realize that corruption is difficult damaging their communities. The reason that they participate in this business is that they do not perceive that they have no real choice. The goods hardly be the only one in the village who do not pay the doctor under the table to get medical care for their children. It is probably not only useless but also dangerous to try to be the only honest police of a Mexican police force. Corruption is, in other words a so-called “frequency problem” in the sense that if one believes that the “all others” involved in this shady business so most either had to join or you see it as futile to resist.

      A question then is where these ideas about “what everyone else is doing” comes from. The evidence suggests that these are generated by the political and economic elite of society occurs. If they are known to engage in all sorts of irregularities spreads this quickly downwards in the community. The German proverb “fish rots from the head down” seems to fit. The ethics of management for companies and public institutions shows up plays a big role and therefore the ethical dimension in the training of these groups is of great importance. – snip

  12. TedWa

    The banks had to commit crimes prior to 2008 to get as big as they did then and to sustain and grow that size, as they have since, they must commit more crimes globally. Their growth has been based on crime and criminal enterprises. In a free market they would never have grow globally as big as they have. As big as they are, aren’t they now much more systemic? Wasn’t that the goal of Dodd/Frank? They were small in 2008 compared to what they are now, they will be bailed out without question, the only thing is when. Why are people saying they don’t need to be broken up? They must be benefiting from the banks crimes is the only conclusion and that amounts to collusion.

    1. TedWa

      Why does everyone talk around the issue that for the banks to get as big as they did in 2008, to the point that they were systemic, they had to commit massive amounts of fraud. Criminal enterprises was the basis of their growth up to that point. Now they’re much larger thanks to Dodd/Frank. Who know what the hell they’re up to to now to sustain that size. We know money laundering and I’m sure it’s just the tip of the iceberg

    2. fresno dan

      I think your exactly correct.
      I also think we are back in feudal times when the Church ran the show and could do the most evil things in the guise of religion – likewise, today banks can get away with anything in the guise of capitalism…

    3. susan the other

      Ummm… flashback to yesterday’s Tett post re how “offshoring” is really only accounting. All the banksters do is create an account for a big deposit of money that makes it non-taxable. And the oligarchy likes this because it allows business as usual because it looks like all is in balance and the dollar is strong, etc. To break up the big banks is to break up this fantasy and without tricks like this accounting foolery the bigs will look as sick as they are and will stay that way. So here’s an idea: a good way to break the bigs up is to pass legislation now in the wake of the Panama Papers that makes it a serious crime to do tax-avoidance investments. That money would be forced into the sunlight and the bigs would crash. All by themselves. They haven’t done real business for years.

      1. susan the other

        Of course strong-dollar people like it just the way it is, all that shadow money hidden away, because if it ever hit the real economy, which is a dead man walking, inflation would take off like a rocket… the only service the bigs perform is keeping inflation down. Very bizarre. So there should be a preventative measure already in place – like massive investment opportunities in environmental programs… think China which is about to build a gigantic wind farm in the arctic. The arctic. And a worldwide grid to distribute power.

    1. inode_buddha

      Speaking humbly as an center/independent, yes it is quite entertaining. Just like the Republican camp. There is entertainment all around me!

  13. Larry Coffield

    One doesn’t need to be a conspiracy theorist to know Executive Order 11110 is still valid. Bernie knows this via Prins and the MMT posse, he even got Stephanie her DC gig. Regardless of whether JFK was whacked for enacting debt-free money and hence giving the privateer cartel the boot, clearly Bernie would have no earthly reason to put forward the executive option in any form.

    As always, no one knows where knave stops and fool starts with Krugman misinforming his flock of conformists, and Newsday is just a local paper, so Bernie was smart to let the snake stay under the rock.

    1. Darthbobber

      Actually the legislative authority behind 11110 was repealed with the passage of PL97-258 in 1982. Then the order itself was eliminated by executive order 12608 in ’87 as part of a general cleanup of obsolete executive orders. 11110 also didn’t do anything remotely like what the people who breathlessly cite it today claim for it. Kennedy had halted silver sales in 61, and proposed a final demonetization of silver, which congress passed. Executive Order 11110 authorized the temporary printing of silver certificates by treasury during the transition period. And nothing more.

  14. TG

    Krugman is a whore whose job is to protect the left flank of Wall Street shills like Barack Obama and Hillary Clinton. And he is well paid for his work.

    You don’t think the elites give Nobel Prizes to people on our side, do you?

      1. Vatch

        Henry Kissinger has a Nobel Peace Prize, too! Just thinking about it does strange things to my inner ear organs.

  15. Dave

    We cancelled our NYT online subscription. I suggest anyone peeved by Krugman do the same.

    Also, whenever one of our friends rejects some a suggestion to read some obscure economic or political article with the usual
    “I only read reputable newspapers like the New York Times”,
    we just laugh in their face and tell them that it is no longer a trustworthy venue.

    1. sd

      Good lord, the NYT isn’t even up to date on food. By the time the NYT writes about it, everyone has already moved on to something else.

      Krugman is yesterday’s food truck.

    2. NotTimothyGeithner

      You should ask your friends about the NYT sitting on the warrantless wiretapping story until after the 2004 election.

  16. Patricia

    Krugman’s ego has become TBTF, causing a total collapse of his intellect.


    Likely the latest economic collapse was born at gatherings of a handful of micro TBTF egos. Bankrupt of all but money, they planned/began.

    We’ve not yet pricked those balloons. They still bounce across the landscape–muddy bits of plastic over-stretching fetid hot air. Deflating them will cause a hell of a stink.

  17. George Washington

    One of the many reasons that Naked Capitalism is a fantastic site is that when Yves explains something, you can trust that you’ve been given an insightful and accurate explanation … which is invaluable.

    1. PlutoniumKun

      And best of all, NC is one of the rare left of centre sites which is unafraid to publish things which contradict their own narrative – a sign of genuine intellectual confidence (which the likes of Krugman so obviously lack).

      But yes, to the broader point, I’ve learned the hard way that Yves is usually right about most things (having been very dubious about certain things she’s written in the past, and then finding out over time that she was right, I was wrong). Oh, and Lambert too!

  18. DavidTC

    So is the theory that Paul Krugman presents is *either* that Citibank wasn’t going to fail, and the government gave it a bunch of money for no reason, or that Citibank could have failed without hurting anything, and the government gave it a bunch of money for no reason.

    Or, in other words, the banks literally own the entire government and can get huge handouts for no reason.

    Which is all *completely fine*, apparently? No cause for alarm at all, and any consideration of reducing their size and power is silly.

    Seriously, if what Krugman was pretending to believe was actually true, yes, the banks aren’t ‘Too Big To Fail’…but they seem to be ‘Way Too Big To Exist In Our Political System’.

    1. TK421

      Well, Hillary Clinton tells me that Wall Street has paid her several million dollars without expecting anything at all in return, so apparently giving away stacks of cash for no reason is the thing to do.

    2. Yves Smith Post author

      The Krugman of early 2009 was calling for the nationalization of Citigroup. But that was before he got the memo from Timothy Geithner.

  19. Pohzzer

    Here’s the real takeaway, and the reason for the article:


    It’s really that simple.

  20. Lambert Strether

    Let me dissect Krugman’s first line: “Bernie is becoming a Bernie Bro.” It’s not clear to me why a fact-based view of the role of banks in the Great Financial Crisis — that is, a view necessarily opposed to Krugman’s — should make one a “bro.” However, many Clinton supporters, including Krugman, seem to derive jouissance from this smear — 61% of young women support Sanders, but I suppose they’re still Bros! — and repeat it at every opportunity, as Krugman does here, upon which it’s faithfully echoed over at Salon. The implication, of course, is that Sanders is sexist, and a vote for Sanders is a vote against all women. (Note that the inventor of the term has repudiated it, but it’s out there.)

    Krugman’s use of the term is contemptible. Krugman is contemptible.

    1. Fiver

      Wow. I missed an entire media/social trend. Just from the quote, I took it to be a poke at some Sanders effort or other to appeal to blacks, or maybe simply be ‘cool’, which is as good a word as any to describe how his appeal resonates with the young and that portion of the Boomed which in its Youth had fought to end a war, then a rear-guard action ever since because some key streams of the power apparatus were essentially abandoned for a decade or more by lefties, hippies, long-hairs, artists, naturists, the entire gamut of ‘alternatives to the system’ lived over those years, during which time an exceptionally focused, well-organized, funded, permanent attack by corporate power/capital ensued. If Krugman had ever, for the least moment, been even a ‘liberal’, he would see that Sanders is a once in lifetime opportunity for substantive change the wealthy can more than afford for social peace.

  21. rex

    Remember, Gerald Celente who has always been adept at recognizing B.S. has often referred to the NYT as “The Toilet Paper Of Record”. Is it any wonder that the likes of Krugman write for such an operation?

    I refinanced the mortgage on my home back in ’08 and one of my criteria in choosing a mortgage company was their promise to service the mortgage for it’s entire duration, never to bundle and sell to any other institution. One benefit of dealing with a necessarily smaller company such as this is that after seven years I can still pick up the phone and speak (on a first name basis) to the same broker who originated the loan and signed the papers at closing. Sure, this company’s underwriting standards are a little higher than some of the larger outfits but I enjoy this kind of stability. I would heartily recommend this company and if anyone desires a recommendation they are welcome to contact me.

    I’ve also been banking at the same locally owned savings institution for some 25 years. I’ve long realized that the larger national banks were gaining too much power and influence and I feel good about not directly participating in their rampant growth. I believe that if all of us simply withdrew our funds from these so-called “too big to fail” institutions we could indeed whittle them down to manageable size.

  22. Pookah Harvey

    Krugman has always been against breaking up the big banks This atitude ignores the fact that money is power.

    One of the main components of the banking collapse was the rating agencies rating the sliced and diced sub-prime mortgages as AAA. Why would they do this? Here’s a quote from a Wikipedia article, long but worth the read.

    Structured investment mortgage-related securities were the rating agencies’ “golden goose”—in the words of one agency manager.[36] Agencies earned as much as three times more for grading these complex products as for corporate bonds, their traditional business. On top of revenue generated for issuing credit ratings, agencies often earned $300,000–500,000 and as much as $1 million to construct a structured investment vehicle.[47] By 2007 the business accounted for just under half of the total ratings revenue and all of the revenue growth for Moody’s—one of the largest agencies.[57] But there was always a danger of losing out on this lucrative business. Issuers played the three big credit agencies off one another, ‘shopping’ around to find the best ratings.

    Richard Michalek, a former vice president and senior credit officer at Moody’s, testified to the FCIC that even when they were not realized, “The threat of losing business to a competitor … absolutely tilted the balance away from an independent arbiter of risk ….” When asked if the investment banks frequently threatened to withdraw their business if they didn’t get their desired rating, former Moody team managing director Gary Witt told the FCIC,

    “Oh God, are you kidding? All the time. I mean, that’s routine. I mean, they would threaten you all of the time. . . . It’s like, ‘Well, next time, we’re just going to go with Fitch and S&P.’”[58]

    At Standard & Poor’s rating service one subpoenaed email sent by a security-issuing banker angry over possible revision of residential mortgage-backed security ratings, told an analyst: “Heard your ratings could be 5 notches back of moddys [sic] equivalent, Gonna kill you resi biz. May force us to do moddyfitch [S&P competitors Moody’s and Fitch Rating] only …”[59]

    Another email between colleagues at Standard & Poor’s written before the bubble burst, suggests awareness of what would happen to the securities they were giving top ratings to: “Rating agencies continue to create and [sic] even bigger monster–the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”[60][61]

    Now would the rating agencies put their reputations on the line if some medium sized bank demanded a AAA rating for junk? Size and power matter.

    P.S. Krugman has gotten awfully defensive ever since Hillary’s Wall Street plans have been attacked by Bernie. PK’s attitude on big banks coincides with Hillary’s. Is it possible that Hillary secretly consulted with PK in coming up with her plan and PK is taking the attacks personally?

  23. shinola

    My local paper (Kansas City Star) carried that Krug column yesterday. I read it & wondered if it might be noticed by Yves or Lambert and what NC might have to say about. Now I know.

    I’m sooo glad I stumbled onto NC a few years ago – just what’s needed as an antidote to the patent medicine the MSM is hawking.

    1. cassandra

      Same here. Imagine: discussions on economics that actually make sense, and outings of economic positions that don’t. How quaintly refreshing! Many thanks to Yves & Lambert.

    2. Olaf Lukk

      A friend (Hillary supporter) emailed me the Krugman article yesterday. Not wanting to take the time to puncture its many misrepresentations point by point, I decided to wait for a rebuttal from Naked Capitalism. Unsurprisingly, it was there the next day.
      Thanks! Yet more proof that Naked Capitalism is the best economics blog on the web.

  24. Benign

    Well flayed. Krugman is a perfect example of the neoliberal hypocrit, really a Republican in disguise.

  25. RMO

    Matt Taibbi’s latest piece covers this nicely. I think Krugman has gone right off the rails – unlike many (most? all?) of the readers here I found it worth following his columns but now he’s approaching Jack Torrance in The Shining levels of craziness. I still have trouble buying the idea that he’s sold out because even in a Clinton administration (shudder) no one in the Washington elite is going to employ him or even listen to him. My earlier notion that maybe he’s rabidly attacking Sanders simply because he really believes that the only candidate who can win the presidency for the Democrats is Clinton just doesn’t seem to account for how vicious and nonsensical he is.

    Maybe he hit on a pretty, young, Sanders-supporting hipster woman at one of the concerts he likes to go to and was humiliatingly rejected?

    1. TomD

      I think it’s two things. One is that he is a legit believer in Hillary Clinton. It was pointed on twitter he a was making the same smears about Obama supporters in 2008. So I think he really does believe Clinton is the best person for the job, for some reason. Another thing is that he is a true believer in technocratic rule. He believes experts should craft policy, and that the average voter isn’t smart or knowledgeable to make these decisions for themselves.

      So a populist movement that is upending certain technocratic ideas and is attacking his preferred candidate, it’s a perfect storm.

      Either that or he does think this is best way to get on Clinton’s economic team in January.

  26. Flowerbud

    I think it has to do with him feeling likely to be jilted in favor of MMT by Sanders. It’s gotta hurt.

  27. hreik

    Question for the economics gurus here. In addition to the primers on Money in the Modern Economy and Money Creation in the modern economy – the pdfs from the Bank of England, can anyone suggest a book for me? It’s an area I’m interested in learning about.
    ty in advance

        1. rex

          Heck, I forgot to mention Michael Hudson who I would consider to be a modern day classical economist.

    1. Mark P.

      Most anything by Michael Hudson. Hudson even had a piece in HARPERS circa 2006-2007 predicting exactly what was going to happen when the housing market started crashing a couple of years later.

      Not anything by Michael Lewis — though he’s an admirable entertainer and THE BIG SHORT is fun, he’ll shirk the heavy lifting intellectually when it comes time to explain anything complicated.

      Literally shirk — years back, at the time of the Long Term Capital Management crisis in the late 1990s, Lewis wrote a piece for the NYT Sunday magazine (IIRC) which, when the part of the story came when he needed to explain what LTCM was doing (that made it so vulnerable when the tide turned), simply had a sentence to the effect that “I would explain this to you, reader, but it’s so complicated that only finance professionals can understand it.” If I’d been his editor, I would have (nicely) drop-kicked Lewis’s lame ass through the window.

    2. Norb

      Currently reading ,”Finance as Warfare” by Michael Hudson. A short book well written and argued. Life is complicated, but underlying all that chaos are simple principles at work. Hudson has a gift for clearly explaining complex economic issues for the layperson.

      Hudson’s work is important for the layperson because he stresses the importance of understanding economic history. For those who are new to the subject, it comes as a revelation to encounter economic arguments that have been raging for centuries- the struggle continues!

      Another source I would recommend is-
      This is a free and open source for written materials founded by Aaron Swartz- the individual driven to suicide by prosecution brought about by the Obama Justice Department. Many of the original works by economists referenced in Hudson’s work can be found free for download. Very interesting to read original works.

    3. Ivy

      Between Debt and the Devil: Money, Credit and Fixing Global Finance, by Adair Turner is also insightful.

  28. Jess

    “Krugman’s claims about these issues are misleading, almost certainly wrong, and, in my view, call into question the credibility of his New York Times column as a source of economic information and analysis.”

    Didn’t even have to read the rest of the article to know that the author nailed it.

  29. Knute Rife

    I swear, Krugstand is now just standing on street corners looking inviting to the Davos johns driving by yelling, “Hey Pauly, $20 enough?”

  30. RootieKazootie

    Another thought to all of the excellent points made. I’ve read PK’s blog for some years now and have noticed something else of recent. His wonkish posts generally get a reader response that rarely breaks 100. On his Bernie bashing posts, it’s not uncommon for him to approach 1000 and that sometimes, around the 700 mark, the replies are cut off so that no more people can respond. If nothing else, PK must know he’s going to get a larger audience.

    Problem for PK is that these posts are – as Yves points out – only serving to destroy his brand. With his last post, I’ve decided it’s no longer worth my time going there and I have to wonder how many others have reached the same conclusion. We have one Fox News too many already.

    1. RMO

      Well, that’s at least two readers he’s lost as I stopped going there regularly too, and I had been a regular reader for quite some time. I was quite favorably disposed to his writing for quite some time and felt his main flaw was one of seeing everything through an economic prism, ignoring all the other factors that influence people and societies. Not atypical among economists of course. If he’s lost me, he’s really off the deep end. I notice that though the Sanders attacks gather lots of response, almost all of it seems negative and those negative comments come from left leaning people. Quite a change from not too long ago when most of the negatives were from readers who leaned right.

    2. Joseph Brenner

      The thing is that the bulk of those thousand-plus comments are pro-Sanders, and vanishingly few of them are remotely close to qualifying as a stupid “Bernie Bro” sneer. Over-and-over again you’ll find people challenging what Krugman’s saying on reasonable grounds. If Krugman disagrees with, for example, Robert Reich, it would be nice if he would explain why (if only in a blog post), but instead he keeps presenting a false consensus where most liberal-left econowonks all agree that Bernie is the Dumb… those of us who can read keep wondering what happened to Piketty, Stiglitz, Reich, etc… There are a lot of economists who Krugman used to tell us were the Good Guys who just seem to have disappeared from his mental map.

      Krugman seems to have stopped even skimming through the comments he gets, he seems to have stopped reading the writings of any other economists… it all just looks really intellectually lazy to me– and I can’t blame the people who keep looking for some darker motivation behind all this.

      1. RMO

        Exactly: lots of response to the posts but almost all of the responses are from people taking down what he’s written, thoroughly and logically.

        Maybe someone’s been giving him Ibogaine:-)

  31. LAS

    During the Obama / Clinton campaigns 8 years ago, PK found reasons to put down Obama, while supporting Clinton. Since then, PK finds that the Obama presidency turned out OK after all in the end. Possibly b/c Obama was less progressive than he seemed during the campaign.

    Because I’ve read papers by Bernie Sanders, watched his Congressional hearings and studied how he acted during ACA negotiations, I find Sanders leaps and bounds better than PK’s lazy smears imply. Sometimes I have defended PK, but not in this instance. He certainly is NOT doing Sanders justice and I’m ashamed of his op-eds on the subject.

  32. Ep3

    Yves, the other day on Lansing’s local am sports talk show, the two sports nuts (they know nothing about anything but sports, as they have proved during every show) spent over half an hour discussing Bernies recent interview with the NY daily news. Specifically, they attacked Bernie for not being clear enough on how he plans to break up the big banks. Based upon their reporting of Bernies answers, I agree they weren’t the best. But they did say that Bernie said he would use Dodd frank to do it. Just as your post here states, Bernie is being attacked for not being clear enough on how he plans to fix things.
    This reminds me of right wing talk radio. They gang up against a candidate.

  33. Plenue

    “I cannot begin to imagine his motives, but that is not the main issue here.”

    He’s a whore. And he’s desperately hoping Clinton will throw him some crumbs if he debases and shames himself enough for her cause.

  34. RBHoughton

    I accept your argument and repudiate Krugman’s but I still wonder why he published those trite views.

    Obviously money is important to him, and so say all of us, but in his case he is trading what kudos he has left from his Nobel for support of the TBTF players in their dying gasps.

    I can only comprehend his words by supposing his belief is that TBTF banks will continue to dictate US financial policy for the foreseeable future whatever the Executive wants, pace democracy.

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