When the Republicans
retook the U.S. House of Representatives last November, it meant
that Ron Paul would be in line to chair the subcommittee that oversees
the Federal Reserve System. Despite the intense lobbying by Ben
Bernanke and others who loathed the prospect of Rep. Paul being
able to subpoena them to appear before Congress and then to ask
them pointed questions about their secret operations, the Republican
leadership still gave Rep. Paul his rightful position.
the Usual Suspects on the Right and the Left are not happy, and
today, I wish to concentrate on the attacks on Rep. Paul by another
Paul, that being Krugman, who has deliberately misrepresented Rep.
Paul's positions in recent columns and blog posts. Krugman's December
20 column called Rep. Paul a "zombie," and then proceeded
to attribute false views to the congressman. All in a day's work
for the man whose name disgraces the Nobel Memorial Prize for Economics.
smears began over the weekend when he first gave Rep.
Paul a backhanded "compliment" for being consistent
in his thinking, but then wrote that his ideas were "crazy."
In a way,
I almost welcome the frankness of someone like Ron Paul, who tells
us that there's no need for any
kind of bank regulations. It's crazy, of course — even Adam
Smith called for bank regulations, comparing them to building
regulations designed to prevent the spread of fires. But at least
the guy's consistent.
is what Rep. Paul actually said:
think we need regulators. We need law and order. We need people
to fulfill their contracts." He added: "The market is
a great regulator, and we've lost understanding and confidence
that the market is probably a much stricter regulator."
What Rep. Paul
wants is not government regulation, nor does he approve of "self-regulation,"
but rather he wants market regulation which comes about via
profits and losses. For example, the banking crisis that came about
in the fall of 2008 existed because consumers and investors were
telling the banks they made wrong choices, and that they needed
(with Krugman's approval) intervened and then pretty much proceeded
to nationalize the country's financial system. As Austrians (and
we count Dr. Paul among our number) have noted, this will not make
the financial regime more stable and it certainly will not make
it more solvent. It just makes the hole deeper and the Day of Reckoning
even more sinister.
was through. He then created another
post for his blog in which he misrepresents Dr. Paul's views
on money. Krugman writes:
I used that
term (paleomonetarism) — it's probably not original, but who knows?
— in a recent post about the increasingly obscure meaning of the
money supply. The best example would surely be Ron Paul, who's
now going to have oversight over the Fed. If you read his stuff,
it's very clear: money is a well-defined quantity that the Fed
controls, and inflation comes from — indeed is defined as — increases
in that quantity.
What he means,
I guess, is monetary base.
goes on to compare the changes in the monetary base with the changes
in the CPI in order to claim that Dr. Paul is wrong on money and
wrong on inflation. Robert Wenzel deftly challenges Krugman in this
was just getting warmed up, and his
December 20 column not only refers to Dr. Paul as a "zombie,"
but he repeats the "regulation" quote but this time
fails to link Dr. Paul's statements to the article in the Wall
Street Journal from where the quote came. He writes:
look back at 2008–10, what will puzzle them most, I believe, is
the strange triumph of failed ideas. Free-market fundamentalists
have been wrong about everything — yet they now dominate the political
scene more thoroughly than ever.
How did that
happen? How, after runaway banks brought the economy to its knees,
did we end up with Ron Paul, who says "I don't think we need
regulators," about to take over a key House panel overseeing
We can expect
much, much more of this, and not just from Paul Krugman. Ben Bernanke
has lots of friends in the media, and one can be sure that Bernanke
will be the source of "anonymous" quotes that will denigrate
Dr. Paul's character and his understanding of money and the economy.
For that matter, Bernanke was the chair of the economics department
at Princeton when the university hired Krugman, so one can be sure
that Krugman has Bernanke's back.
one can bet that much of the banking and monetary establishment
is going to try to destroy Dr. Paul's character over the next two
years, and given that the Washington media really does not care
about facts and certainly not the truth, one can bet that every
false rumor about Ron Paul will be bandied about by the mainstream
Of all people,
Krugman understands that when an academic writer such as himself
deliberately misrepresents someone by using a quote to push a point
of view the other person does not have, he is engaged in fraud.
This is the kind of fraud that at one time discredited someone to
a point where his good reputation and sometimes his academic position
were taken away from him.
that no longer is the case. Krugman has signaled that he is quite
willing to be a hatchet man for Bernanke and others and to insult
and misrepresent what Ron Paul is doing and saying. That Bernanke
and his Wall Street friends are willing to go along with this tells
us much more about them than I really want to know.
would add that Henry Hazlitt, who was a much better economic thinker
than Krugman ever will be, wrote columns for Newsweek for
many years, yet never engaged in this kind of personal invective.
Today, invective is about all Krugman and others like him understand.)
It is going
to become even uglier than it is now, and the new Congress has not
even been seated.
L. Anderson, Ph.D. [send him
mail], teaches economics at Frostburg State University in Maryland,
and is an adjunct scholar of the Ludwig
von Mises Institute. He
also is a consultant with American Economic Services. Visit