Earlier today, HousingWire posted some coverage of the alleged circumstances around the pending resignation of New York Times columnist Paul Krugman from his professorship at Princeton University.
The main reason for Krugman’s decision?
The Forbes coverage points to Krugman being "thoroughly indicted and publicly eviscerated for intellectual dishonesty by Harvard’s Niall Ferguson in a hard-hitting three-part series in the Huffington Post, beginning here, and with a coda in Project Syndicate, all summarized at Forbes.com."
Soon after posting, I received an email from a popular economics blogger, who took me to task for publishing the article in the first place.
“Ferguson has become a laughing stock among analysts (remember his declaration that public employment was soaring under Obama – ignoring the temporary Census hiring! ROFLOL)," they wrote.
"Ferguson has been wrong about everything from inflation to employment … one good historical book doesn't make him an expert on everything," they added.
Considering that calling out economic predictions as wrong can lead to nothing short of celebrity temper tantrums caught on video, I promised the blogger that I would do right by Krugman. And this blog is just that.
In July 2011, HousingWire magazine ran a profile of Krugman on our cover. It won awards then, but even more amazing is that Krugman made several economic predictions that proved to be accurate, unlike CNBC’s Santelli.
Here are those three predictions:
1. No writedowns at Fannie and Freddie
In 2011, people were pushing for writedowns. Hard. The FHFA acting director Ed DeMarco held his ground and resisted forcing writedowns at the government-sponsored enterprises. A year later, there was a huge push to get him out.
Today, we still seem no closer to such homeowner relief.
In the interview Krugman said he favored the writedowns, but pragmatically knew it would never happen. Nailed it.
2. There would be a third round of quantitative easing
Krugman even had advice on how to best do this, more than a year before the Fed went ahead with its plans:
“I recommend government bond purchases being focused on buying agency debt, corporate debt. I’m still of the belief there is only so much that can be done with the federal balance sheet.”
“The only way the government can get traction is if QE3 is accompanied by signals that the Fed has somewhat raised its inflation target. If we made it 3 or 4% would be the really effective thing.”
(Last I checked it stood at 2%, but still. Wow.)
3. The end is not near
Krugman’s accompanying slide show presentation at a HousingWire event was titled “The Mess We’re In,” and warned about thinking it would be an easy fix.
“People make the mistake of thinking this environment is so weird it can’t last much longer. This can go on for quite awhile, far longer than most people are currently thinking.”
Three years later, still no end in sight. Bam.
Bonus: Meredith Whitney is wrong
At the same conference, fellow economic analyst Meredith Whitney said the solution to healing America’s economy lay in the agricultural sector.
Krugman called the notion “impossible.” In 2011, unemployment was above 10%, now it is nearing 6%, with growth in the nonfarm payroll numbers the driving force.
“My favorite statistic is that we now have more people in America playing World of Warcraft than farmers,” Krugman said.
There is, of course, no way to prove that statistic, but it still makes for a bonus. And while Krugman may not himself play video games, he still deserves credit for the things he got right.
Especially since he said it three years ago.
