Mathematical Proof that Academics are Idiots

 Facts: 

Paul Krugman, a Nobel prize winner, has repeatedly claimed the following:

"And huge emphasis on monetary aggregates, which have been totally useless at predicting inflation (Milton Friedman got this repeatedly wrong in the 1980s)"
 
Krugman used the chart below as validation.
 
 

The red curve shows the rate of change of inflation and the blue curve shows the rate of change of M1. The amount of  inflation is the area under the red curve; The total M1 is the area under the blue curve; this is high school mathematics.
 
The total inflation (over a long period of time), aligns quite well with the total M1 (over a long period of time); hence, this chart is  not evidence that inflation is not  correlated with M1; indeed, the chart indicates the opposite.
 
The chart does indicate that inflation is not instantaneously related to M1; but to be honest, no one cares if money printed today causes hyper-inflation tomorrow, or in two years time.

I suggest that these series of posts are evidence that Krugman is either an idiot or deliberately disingenuous. Further, no academics have called him out; and he has been waving the chart around for quite a few months; this indicates that academics in general, are either disingenuous or idiots.


 

Comments

  1. Hellasious17 June 2021 at 01:51

    Krugman is no idiot, but he is being disingenuously sneaky. He’s using M1, which is completely worthless as a measure of broad-based money supply. A graph of M3 vs CPI shows that money creation and inflation are VERY much correlated.

    Another factor during the 2000-2015 period was the deflationary effect of cheap Chinese exports. In sum, the West printed money (ie went into debt) to buy cheap imports: they exchanged low prices with massive trade deficits and debt.

    That deflationary mechanism is now over. China is no longer “cheap”.

    ReplyDelete
    Replies
    1. a kind of chicken17 June 2021 at 05:02

      That is true... China is inflating; you can feel it now.

      I didn't know there was another M1-M3 trick on top of the graph interpretation trick; makes you wonder if we are missing some motive somewhere...

      Delete

Post a Comment

Popular posts from this blog

Project America

Democracy assumes that the majority of the population cares about the country more than themselves. This is increasingly not so. As the Greeks warned so, pure democracy is dangerous.  If we have a democratic system where everyone  focuses only on himself, everyone will keep garbing from the government, resulting in a erosion of social and moral values. The following proposal is suggests a system that can promote the ideals on which the United States of America is founded, while providing a mechanism for transiting from the current system. ################################################# America citizenship is a honor to be earned, not a right to be demanded because of accident of birth. Citizenship is open to everyone, regardless of race, language or creed. 1) All men are not equal. We acknowledge this by giving those that contribute more a greater number of votes, better welfare, medical care, etc. 2) There are twelve ranks of citizens.  3) Each citizen  in ranks 1...
Read more

The Casino Economy Explained

Hell has put forward his opinion that markets are currently in a bubble of mega proportions; something which he terms the casino economy. As anyone that follows his blog knows, I agree with his proposition that most assets are over-valued but disagree with his analysis of today's phenomenon in terms of a traditional bubble. In this post, I will formally develop my arguments.  I propose that the current asset market bubble is not driven by greed but by fear; fear of a total political / economic meltdown of the global economy. When we view the stock market, bit coin and gold price go through the roof, we should not think of them as bubbles that will eventually deflate but as an ever growing price for insuring against catastrophic financial collapse.  Similarly, when we view the apparently irrational boom in momentum driven assets, we should not think of it as irrational behaviour of dumb people but the rational behaviour of investors who think that the long term does not exist....
Read more