"He builds elaborate Keynesian models that treat consumer spending as the engine of prosperity..."

Paul Krugman: "He builds elaborate Keynesian models that treat consumer
spending as the engine of prosperity, ignores the capital structure of
the economy, and then acts surprised when manipulating
aggregate demand produces distortions in real production. 

"Paul Krugman has spent three decades telling you that government spending cures recessions, that deficits don't matter when interest rates are low, and that anyone who warns about inflation is a crank.* 

"Then 2021 happened. 

"The Biden administration pumped $1.9 trillion through the American Rescue Plan in March 2021. Krugman called inflation fears overblown. By June 2022, CPI hit 9.1 percent, the highest since 1981. Krugman's response was to move the goalposts and call it a soft landing when the Fed started hiking rates. [Similarly, here in New Zealand, CPI hit 7.3% in June 2022, a 32-year high, after Grant Robertson's own 'rescue plan' pumped $70 billion into our own small pond.]

"This is the pattern. He builds elaborate Keynesian models that treat consumer spending as the engine of prosperity, ignores the capital structure of the economy, and then acts surprised when manipulating aggregate demand produces distortions in real production. 

"The villain is IS-LM thinking that strips out time, entrepreneurship, and the price signals that actually coordinate economic activity. When you flatten the economy into aggregate demand curves, you produce policy advice that consistently mis-prices risk and encourages central banks to suppress interest rates well below what voluntary savers would accept. 

"Krugman won a Nobel in 2008 for trade theory work that genuinely mattered. But he abandoned rigorous analysis for political performance years before that prize arrived. His New York Times column became a vehicle for justifying whatever the Democratic Party needed justified, with the academic credentials attached as decoration. 

"Ludwig von Mises and Friedrich Hayek built their entire framework on the impossibility of central planners processing dispersed local knowledge. Krugman's worldview requires exactly that kind of central management. The [central bank] sets the price of credit for the entire economy, guided in part by intellectual cover that Krugman provides. 

"You pay for that cover every time your purchasing power erodes. But the man with the Nobel told you it was fine."

~ Handre

* Bernard Hickey put on a similar performance here, but without even the pretence of economic acumen. At least people have the excuse of a Nobel Prize and good work in the past for taking Krugman seriously. Galt knows what Hickey has done to deserve attention.