Tuesday, January 5, 2010

Krugman (probably) wrong again; Hussman scores

Krugman Sees 30-40% Chance of U.S. Recession in 2010 – Proving once again that he knows nothing about business conditions or how the real economy actually operates, Paul Krugman is forecasting a significant chance of “recession” in 2010.  Now, the definition of “recession” is political, made by the National Bureau for Economic Research, usually well after the event; and Krugman is an Establishment insider, so he may know something I don’t, namely that the NBER is planning on changing their “definition,” which usually tracks the slope of Industrial Production and a few other primary economic series pretty well.  My recession forecasting model, which forecast the 2001 and 2007-? recessions from a year or more in advance, says “no recession in sight” (in the traditional NBER sense), but rather, a basically L-shaped chugging ahead at some finite positive slope.  Here’s the chart from the last update:


Sometimes I just want to grab Krugman by the neck and yell, “The economy doesn’t go into recession with the yield curve as steeply sloped as it is now, Paul!”

My best-guess is still that we’ll limp along for a couple of years, weathering the next waves of rate-reset defaults on exotic mortgages, until the next debt-deflationary collapse around 2013.  That is when the fiat money hits the fan.

The best way to get an inflation (or hyperinflation) going, historically, has been to be at war.  It is my working hypothesis that all the idiotic fiat monetary authorities of the world are conspiring to inflate their way out of their unmanageable debt loads, so we should see all the monetary Wizards gathering with all the Daddy Warbucks by mid-decade to expand our endless wars.

That is, unless a new government is put in place.

Timothy Geithner Meets Vladimir Lenin - John Hussman on the Fed and Treasury’s overstepping their legal authorities and the likely consequences for taxes paid by the American people.  Must reading.  Remember, Tim Geithner “forgot” to pay $35,000 in federal taxes.  Raise marginal rates on incomes over $1 million to 90 percent!  Bring the ruling class back down to earth!  Let them know that they are not gods!


  1. Professor Krugman is well-meaning, but like most of us, doesn't know what he doesn't know, as this recent dustup with Michael Hudson (www.michael-hudson.com) clearly showed:


    2. http://krugman.blogs.nytimes.com/2009/12/18/why-economics-is-the-way-it-is/

    3. http://neweconomicperspectives.blogspot.com/2009/12/michael-hudson-responds-to-paul-krugman.html

    4. http://neweconomicperspectives.blogspot.com/2009/12/lost-science-of-classical-political.html

  2. Michael Hudson is great. He and William Black are strong voices for those willing to find their pieces outside the MSM.

  3. Mr. Brodowicz

    Saw/heard Michael Hudson 'down under' in Sydney last October-amazing the centre of gravity at UMKC for 'renegade economists'!

    Q: I am interested in the mechanics of your 'animal spirits' forecasting model....can you please point me to anything to read on it?

    have enjoyed your blog since I discovered it last year!

  4. http://arxiv.org/abs/nlin/0108012v4