The men and women (though, in truth, it’s nearly exclusively men) at Zero Hedge seem always very concerned with being right, especially if/when they perceive others as being wrong. Their output as observers of the financial scene is comparatively quite prodigious – and I know this because I monitor a fair number of econ/trading sites: Zero Hedge consistently produces far more posts-per-day than other such sites. And they can usually be counted to be among the first, if not THE first, with any new financial news. I’ve learned of many new developments on Zero Hedge’s site before other sites had them. I obviously don’t know for sure, but I’d bet the principals of ZH all have Bloomberg terminals in their offices (perhaps even in their bedrooms, for all I know, judging from the time-stamp of some of the posts they write). And they certainly don’t suffer from an overabundance of respect for the financial elites of this country – or this world. Sometimes, you can find cogent, Cassandra-like financial analysis at Zero Hedge that’s difficult if not impossible to find anywhere else. All of that can be quite worthwhile.
Unfortunately, even more frequently, what you find at Zero Hedge is a chronic – bordering on terminal – sort of wisecracking insider’s myopia. The same willingness to offend the world’s fiscal and political elites with fearless criticism begins, after a while, to more closely resemble not fearless truth-telling, but a sort of Blackboard Jungle-delinquent’s need to offend. And that’s what makes so much of Zero Hedge’s analysis suspect and tinny sounding: it’s not the reflexive Ron Paul fixation (though lord knows, there’s more than enough of that on display at ZH), it’s not the glassy-eyed goldbug zealotry (though, again, there’s plenty of that). It’s pieces like this one from today, in which the authors, in their seemingly reflexive need to be the coolest/savviest guys in the room, subtly (or, often, not-so-subtly) attempt to pretend reality is different than what it is so they can once again slam their usual suspects list of perceived bad actors on the economic stage.
Zero Hedge contributors’ list of “bad actors” on the economic stage is long indeed — and the fact that some of their targets do indeed richly deserve their spot on such a list makes it impossible to dismiss Zero Hedge entirely. But ZH’s list of bad actors also includes a host of people whose apparent crime is nothing beyond opposing the authors’ return-to-the-gold-standard philosophy, which essentially means any prominent figure who espouses anything resembling Keynesianism. Chief among these, you’ll have figured out by now, is Paul Krugman.
I’m not here to defend Paul Krugman from all charges. He’s a public economist with a very distinct voice and set of opinions. Those opinions are not sacred, and there are certainly criticisms of them which can be made (and are made, by various other public figures). But Zero Hedge’s approach to Krugman appears to be little beyond calling him names (“Kaped Keynesian Krusader,” “high priest of Keynesian shamanic tautology; Princeton-grade hilarity,” etc.), coupled with what appears to be the smug assumption by the authors that they need do little beyond deploying their sneering to prove that Keynesianism=bad while not actually bothering to refute what actions or statements of Krugman’s they object to. And when the authors DO bother to try to insert some analysis, they have to fudge the facts – or at least their interpretation of them – as in today’s piece:
When you dig into the charts and data supplied by the Federal Reserve generated report, the data which goes back to 2001 tells a story not addressed by the deceptive, manipulative, political propaganda that passes for investigative reporting by the captured mainstream media.
Wow, great! That ostensibly sounds like the kind of deeper analysis a layperson interested in economics – specifically, the causes of the recent recession, increasing inequality and similar topics might really get something out of. But then, following almost immediately on the heels of that “let me tell you how it really is, kid” introduction, the reader is treated to this:
This is why the median income rose while the average income fell (my note: in the 2000s). The wealthy have a large impact on the average because they own the vast majority of assets in this country. The stock market debacle was unacceptable to the oligarchs and their money printing puppet Greenspan.
Both the liberal and conservative wings of the ruling oligarchy were in complete agreement. A new bubble needed to be blown in order to refill the coffers of the ruling class. Paul Krugman spoke for the liberal wing:
“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” (emphasis added)
Wow. That would be bad, if “both the liberal and conservative wings of the ruling oligarchy were in complete agreement.” And perhaps parts of them even were in complete agreement — after all, Zero Hedge’s authors are far from the first to suggest that America has two parties which are both subsets of (or captives of) the business party. But, as well known as he is, Paul Krugman is not now and has never been an active part of the “ruling oligarchy” in any real sense of the term. Zero Hedge is simply using him here, as they often do, as a stand-in for what “the liberals,” by which they mean “Democrats” think. Never mind that Krugman has spent much of the last dozen years excoriating Democrats as well as Republicans for not pursuing vigorously enough (or at all, in many cases) the policies he believes to have the best chance of righting our economic ship. No, to the Zero Hedge gang, the cartoonish false equivalence of Democrat=liberal=Keynesian=bad is something they assume you take on faith when you read their posts; that’s why although Krugman’s not a politician, and holds no appointed office (or even advisory position) with the government, Zero Hedge feels free to use Krugman as their stand-in for what “the liberal wing of the ruling oligarchy” believes.
Even that stretch isn’t the real problem with this piece, though. The real problem is that what Zero Hedge tries to convince readers to think Krugman believes (or at least believed in 2002) simply isn’t accurate. I wondered immediately about the bolded passage above, because it sounds so contrary to the table-pounding Krugman has been doing on the economic front for years (to, sadly, very little real-world response from actual policy-makers). This would indeed be a damning quote from Krugman, if he had said in 2002 that what we really needed at that time was a big ol’ housing bubble to help out our economy.
So I went looking for the source of the quote. Had it happened backstage at a conference, in earshot of only one or two people, one of whom just happened to be the Zero Hedge writer? Was it an unscripted moment on a TV show Krugman appeared on? Perhaps one Sunday in 2002 on This Week? As it happens, it was none of these things. The quote in question from Paul Krugman was – surprisingly – from his own New York Times column. The reason I say “surprisingly” is because if the quote had come in an unscripted or “backstage” moment, it might have been more believable (while simultaneously being much harder to verify/corroborate). But it’s reasonable to assume that an intelligent man with the public profile of a guy like Krugman, writing in the nation’s leading newspaper, would review his own words and edit them to say exactly what he wants them to say before allowing them to be published. That’s why it’s difficult to imagine that someone with the record or public statements that Krugman has would have knowingly published something like the above quote which makes a mockery of all the rest of what he’s spent so much effort talking to us about.
As they say: if it seems too good to be true, it probably IS. Krugman said nothing of the kind — though the quote itself is accurate. Don’t take my word for it, judge for yourself. Here’s the piece in question, on the NY Times site. The quote Zero Hedge excerpts is indeed verbatim. But notice Krugman’s language in it. He says the FED “needs soaring household spending to offset moribund business investment” in order to combat the recession, not that HE (Krugman) thinks this is either advisable or likely. To do that, Krugman says Alan Greenspan (not Paul Krugman) would need to create a housing bubble to replace the Nasdaq bubble. But the kicker’s on page two of the NY Times piece, and it’s (surprise!) not excerpted by Zero Hedge – probably because it would ruin their “Keynesianism=bad, Krugman=Keynesian, therefore Krugman=bad” meme:
Bear in mind also that government officials have a stake in accentuating the positive. The administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed. Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble.
This removes all doubt that what Paul Krugman was talking about was not HIS OWN prescription for the economy, but what he believed the administration would need to do if it wished to avoid a second leg of the recession and/or uncomfortable inquiries into its own role in that recession. Krugman’s not advocating bubbles, whether stock or housing, he’s pointing out that the administration is in a corner, and that the only way they can continue to “extend and pretend” that things are OK, now that the stock bubble has burst, is to create some other, equally damaging sort of bubble to replace its effects.
Of course, this is all my own analysis of what Krugman was saying in his NY Time column back in 2002. I think a fair read of the column removes any doubt that my interpretation is correct, but if you need more convincing, well, I have some. Quick background: apparently, the Atlantic’s reflexive-libertarian financial columnist Megan McArdle is the one who, along with Arnold Kling in 2009 first lifted Krugman’s quote so deceptively from the archives where it had lain undisturbed since ’02. Tellingly, McArdle accompanied the quote only with “wow. Just wow,” along with the barely-concealed schadenfreude of: “there’s a paragraph I’m sure glad I didn’t write.” McArdle seems to have known instinctively not to elaborate because her implication wouldn’t stand up well to scrutiny. Also, despite her lofty post at the Atlantic, McArdle is apparently not above the equivalent of the schoolyard “ooooooh, burn” type of gotcha comment.
In right-wing circles, one of the primary pastimes (and certainly the most enjoyable one, judging from the enthusiasm with which it is pursued) is making liberals look bad. Bonus points appear to be given if one can do so with a given liberal’s own words, so McArdle is really scoring high on this game with the above “scoop.” What also tends to happen immediately after someone makes such a “scoop” or “burn” on a liberal is that the “scoop” rockets around the conservative blogosphere and email-chains immediately and incessantly until it becomes embedded into the fabric of What All Conservatives Know To Be True. This “burn” on Krugman was no different. In fact, it achieved such prominence that apparently Krugman himself became aware of it, probably due to cranky, gloating commenters in the comments section of his NY Times blog repeating it to him.
So he addressed it.
Yup, the thing to keep in mind when reading this piece from Zero Hedge is that this kerfuffle happened two years ago and Krugman already responded. Of course, not being a regular on conservative websites, I didn’t know that myself when I read this ZH piece. My investigation was all based upon my own skepticism that Krugman would say such a thing; it just didn’t ring true. But it took me less than two minutes to find both the original Krugman column (which confirmed my suspicions) AND this post at Business Insider (not exactly a bastion of Krugman (or Keynes)-apologia), which quotes Krugman’s response directly:
One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy. I was personally responsible for the demise of Enron; my nonexistent son worked for Hillary; etc.. The latest seems to be that I called for the creation of a housing bubble — in fact, the bubble is my fault! The claim seems to be based on this piece.
Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.
Exactly. Krugman confirms what a careful reader would not have needed him to confirm, just by reading his initial piece. But the reader won’t get any of this from reading Zero Hedge’s purported inquiry into “who destroyed the middle class.” What’s sad is that I’m sure there are a lot of people who would like to know the answer to the question of who destroyed the middle class. Unfortunately, people won’t get it from reading Zero Hedge. What they’ll get instead is a sloppily (and perhaps mendaciously) excerpted quote that attempts not to enlighten the reader about the causes of some of our current economic problems, but to continue a longstanding, ideologically-based vendetta against a person who represents a decades-old economic philosophy the Zero Hedge authors long ago decided was simply bad, bad, bad under all circumstances. In short, what the reader gets from Zero Hedge is a two-year old, discredited-and-put-to-bed faux scandal, resurrected and pressed into service against Krugman and Keynes one more time. The real shame – for both the reader and for Zero Hedge – is that ZH had to actually continue to obfuscate, mangle and misrepresent what Krugman actually said and believes in order to be able to do so. And that’s why Zero Hedge will always, for all their prodigious output, be second-rate cranks when it comes to the intersection of politics and economics.