Beating up Paul Krugman – a Nobel Prize-winner who is a poster-child for “narrow expertise” – is a little like fact-checking Heather Martens; it’s easy, and there will never be a shortage of material.
Rich Karlgaard at Forbes spells out yet another reason Krugman is jumping from Princeton in disgrace:
Krugman says the rich sock their money in low-yield bonds. But he fails to consider the obvious. Stocks have almost tripled since March 2009. Urban real estate is in a boom. Art is in a boom. If you believe Krugman, it must be the poor folks who are feeding these asset bubbles. Because the rich, Krugman says, are stuck in low-yield bonds.
This is utter nonsense. The excess liquidity created by U.S. monetary policy does not wind up in the hands of the poor. It winds up in the hands of the rich. The rich then put it into stocks, real estate, hedge funds, and art.
It’s actually the poor and lower middle classes whose wealth — such as it is –lies fallow in no-interest bank accounts (or wealth-eroding cash if they have no bank account at all). It’s not the rich, but middle-class retirees that try to eke out a living on low-yield interest rates.
Krugman has it exactly, 180-degrees wrong. Cheap money is a transfer payment to the rich. It is a tax on the poor. The rich-poor divide grew vast under the cheap money policies of Ben Bernanke. This trend will surely accelerate under Janet Yellen.
Wonder what it’ll be like, someday – maybe decades from now, maybe in the afterlife – when “progressives” realize they’ve been squeeeeeing like a bunch of teenager grrrls at a One Direction concert over the permanent destruction of the middle class.