It should never have gone this far. Krugman should have conceded long ago. The flurry in the blogosphere has been unrelenting, and Steve administers the coup de grace here.
Read it at Steve Keen's DebtWatch
by Steve Keen
UPDATE: My comment at Krugman's blog:
Does Professor Krugman realize that the US and world were operating under a convertible fixed rate system in 1963 when Tobin Brainard was published and that Nixon closed the gold window on August 15, 1971, putting the US on a non-convertible floating rate system, which the rest of the world ratified by treaty in August 1973? Please see Basil Moore, Horizontalists and Verticalists, 1988. And this is not just what the MMT crowd is saying; it's also Post Keynesians and Circuitists. Moreover, there are Fed and BIS papers denying that there is a money multiplier. This is a losing battle, Professor.
UPDATE: My comment at Krugman's blog:
Does Professor Krugman realize that the US and world were operating under a convertible fixed rate system in 1963 when Tobin Brainard was published and that Nixon closed the gold window on August 15, 1971, putting the US on a non-convertible floating rate system, which the rest of the world ratified by treaty in August 1973? Please see Basil Moore, Horizontalists and Verticalists, 1988. And this is not just what the MMT crowd is saying; it's also Post Keynesians and Circuitists. Moreover, there are Fed and BIS papers denying that there is a money multiplier. This is a losing battle, Professor.
12 comments:
Interesting that the geocentrics hung on because the complexity of their models gave them the power to confuse others with mysticism and high mathematics.
One of the criticisms levelled at MMT is that it is too simple.
Wow. Krugman really ran into a buzzsaw with Keen.
It is clear now why Krugman didn't get MMT. The accounting is very clear in Mosler's full employment and price stability. Krugman spent endless hours discussing MMT and never bothered to read some of the papers that were suggested to him.
If he understands the correct accounting there now then IS-LM is dead for him, but I doubt It.
Krugman is visibly angry that he lost the discussion on the endogeneity of money...
http://krugman.blogs.nytimes.com/2012/04/01/tobin-brainard-1963/
He can no longer pretend like IS-LM has any basis, so he is pissed...
Ouch!
PK has too much to lose by admitting he is wrong. He attempted to bully and mock into submission the 'heterodoxy' yet they were right all along.
His text books, nobel prize, countless publications, articles and posts become quackery when he admits defeat. It is unthinkable. Better to deny and continue his fade into economic irrelevance.
Neil- interesting point.
The reality is that it's only a coup de grace for those against Krugman at this point. The other side just doesn't get it, and they won't until a critical mass of support is reached within the mainstream.
@wh10
Great stuff on Nick Rowes blog, mentioned by Krugman as well!
I went staright over to Rowe's blog when Krugman mentioned it. I love a good fight.
Rowe is in denial too.
Well, now he is really pissed off. Let's hope he one day comes to his senses.
Tom- did the mechanics and implications of this actually change before switching off the gold standard? If so, how and why? Thanks.
wh10, when money is convertible, the cb has to insure that preference for holding gold is less than that of holding money and it has to manage bank reserves with an eye on reserve ratios and insure that the interest rate is attractive enough to prevent excessive conversion. This is really the cb's chief occupation under a convertible system and that reduces policy space by curtailing deficits. The government is a 'gold user" as much as a currency issuer and is limited by quantity, needing to tax and borrow for fiscal and to maintain a "tight ship" to prevent runs out of currency into gold. FDR initially ended domestic convertibility and then Nixon finally ended international convertibility to gain policy space.
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