I shouldn’t do this but . . .

. . . I couldn’t resist.  This is from Krugman’s March 1 post:

A quick response to Scott Sumner

OK, I see that Scott Sumner has written an open letter to me. But I’m puzzled. He writes:

“I think you have acknowledged that there is some level of quantitative easing that would boost demand. If I am not mistaken you are concerned that if such a policy boosted inflation expectations sharply, the Fed would have to quickly sell off these assets, suffering massive capital losses.”

Um, you are mistaken. I’ve never said such a thing. Did you mean to address this letter to someone else?

And here is something from his blog 19 days later:

My back of the envelope calculation looks like this: if the Fed buys $1 trillion of 10-year bonds at 2.5%, and has to sell those bonds in an environment where the market demands a yield to maturity of more than 5%, it will take around a $200 billion loss.

I’m not complaining; I think quantitative easing (it’s really qualitative easing, but I give up on trying to fix the terminology) is the right way to go. But we should go into it with our eyes open.

Any Krugman defenders wish to comment?



31 Responses to “I shouldn’t do this but . . .”

  1. Gravatar of Jon Jon
    30. March 2009 at 17:30

    The man is die-hard Keynesian to the end–apparently the quantity aspect is irrelevant. Its all about price-signals and discouraging savings, ho-ho-ho.

    I still cannot figure out if he really believes that the Fed implements policy primarily by tbill transactions or not.

  2. Gravatar of Dilip Dilip
    30. March 2009 at 18:23

    You sure nailed him there.

  3. Gravatar of tom s. tom s.
    31. March 2009 at 00:23

    Couldn’t the Fed “write a check to itself” to cover the $200 billion loss in Krugman’s hypothetical? What does it really mean to speak of Fed profits or losses? Krugman is purposely confusing people. He wants to undermine quantitative easing while seeming to be supportive. He wants huge fiscal stimulus because he wants huge government.

    In the same time frame, Alex Tabarrok wrote this at Marginal Revolution: “The fact that the Fed usually buys short-term bonds is a minor issue as far as monetary theory is concerned, like the fact that the Fed usually prints $1 bills but not $2 bills.”

  4. Gravatar of anon1 anon1
    31. March 2009 at 02:36

    I’m not clear on this. The fact that he made an argument 19 days after he said he’d not used that argument previously suggests what?

  5. Gravatar of ssumner ssumner
    31. March 2009 at 03:57

    Jon, I agree. BTW, do you have any data an the normal proportion of OMOs done with T-bills. I believe it was mentioned before. But I forgot.

    Dilip, The reason I said “I shouldn’t do this” is that I thought my previous 2 replies were also pretty convincing. But this was even more exact, so I couldn’t resist.

    Tom, The Fed can write itself a check, but it would be inflationary. Krugman’s point is that if they want to pull the money back out in a way that prevents future inflation, they might suffer a capital loss that requires a fiscal expense. I mostly agree with you and Alex on the $1 and $2 bill question. Monetary policy primarily works through changing expectations of future nominal growth. And since even liquidity traps don’t last forever, any permanent increase in M will have similar effects, regardless of what is purchased.

    ana1, I hardly know where to start.

    1. In previous post I’d already provided several examples of where he expressed similar views before my open letter.

    2. In his March 1 post he did not just deny having said what I attributed to him, he went on to deny believing those things. I didn’t think I needed to quote the full post, as I thought readers would be able to infer that he was also denying holding such a belief.

    3. Let me ask you a general question: If someone attributed a policy view to you that was preceded by “I think you have acknowledged . . . I believe that you . . .
    AND YOU DID IN FACT HOLD THOSE POLICY VIEWS, would you indignantly deny ever saying such a thing. Or would you say “I don’t recall saying that, but yes, those are my views.” Just curious.

  6. Gravatar of anon1 anon1
    31. March 2009 at 04:20

    He stated his views in the second paragraph that you didn’t quote. Did that contradict his first paragraph? I hope not.

    Does the second paragraph contradict what he subsequently said? Did he fundamentally change his views in 19 days? I suppose it looks that way, but from the parsing of the two statements, it isn’t completely clear to me.

  7. Gravatar of ssumner ssumner
    31. March 2009 at 04:54

    anon1, With all due respect, this is getting silly. Did you even read my open letter to Krugman? Of course he has not subsequently contradicted the exact wording in his second paragraph (which discusses T-bill purchases) but he did contradict his denial of my assertion he favored quantitative easing. And don’t say he was only denying favoring QE with T-bills, as my letter repeatedly emphasized that QE meant the purchase of non-T-bills, which is also the interpretation of QE of just about everyone in the world. And it is also the definition of QE that KRUGMAN HIMSELF USES in the March 20 post.

    Just to be clear, I doubt he changed his views in 19 days, (although I am not a mind-reader), rather my hunch is that when he denied holding the views I attributed to him, he actually did hold those views. This is especially likely because he also expressed these views several times before denying holding them. Now it is very possible that he might have misunderstood my letter, but in that case shouldn’t he clear up that misunderstanding up on his part in a subsequent post? It’s not like my letter was in the slightest way vague about QE.

  8. Gravatar of anon1 anon1
    31. March 2009 at 06:01

    You’re the absolute judge of whether it’s silly; but you also invited comments from “Krugman defenders”. You didn’t say defenders are restricted to one swing at the ball.

    Here’s how I see it:

    Krugman defines liquidity trap as ineffective conventional easing

    Krugman doesn’t care how anyone else defines liquidity trap; the key idea is that conventional easing is ineffective

    He says unconventional easing involves an unattractive element of credit risk; he NEVER SAYS that it’s any more effective against a liquidity trap than conventional easing; in fact he suggests the opposite by implication

    He acknowledges unconventional easing has taken place

    He welcomes unconventional easing; he doesn’t specify why but presumably it has something to do with the transfer of credit risk from the private sector to the public sector; he NEVER SAYS that he welcomes unconventional easing because it will be more ineffective against a liquidity trap; he NEVER says he expects it will boost demand; what is natural to assume is that unconventional easing as an asset operation complements capital injections from treasury as a financial risk backstop; unconventional easing involve credit risk in a way that conventional easing doesn’t – why would you expect that the result is only defined in liquidity trap terms?

    I see no proven contradiction.

  9. Gravatar of anon1 anon1
    31. March 2009 at 06:07

    above should read:

    “he NEVER SAYS that he welcomes unconventional easing because it will be more effective against a liquidity trap”

  10. Gravatar of Alex Alex
    31. March 2009 at 06:15


    Krugman believed that monetary policy can still work in a liquidity trap all along. I quote from a short piece he wrote
    10 years ago:

    “Monetary policy: It may seem strange to return to monetary policy as an option. After all, haven’t we just seen that it is ineffective? But it is important to realize that the monetary thought experiments we have performed have a special characteristic: they all involve only temporary changes in the money supply … A permanent as opposed to temporary monetary expansion would, in other words, be effective – because it would cause expectations of inflation.”


    So why did he insisted on the liquidity trap being a black hole from which the only thing that can get us out is fiscal policy? The answer in my opinion is simple, he just wanted the government to spend more, to expand medicare, medicaid and all other welfare programs. The crisis is being used as an opportunity to change the American economy in many ways that are not related to the current crisis. Now Krugman has realized that the Fed is going to get the economy out of the liquidity trap so he has to get on the winning side before it is too late.

  11. Gravatar of Alex Golubev Alex Golubev
    31. March 2009 at 06:28

    I care about truth a lot more than what a celebrity thinks and Krugman is nothing but that. Well, he’s also a cocky douchebag. He was at the Seattle townhall a few months ago and i happened to have tickets to a speaker that got pushed over into the basement of the townhall to make room for Dr Ego. I am SO glad I kept my tickets and saw the original speaker. He gave more insight about the human condition in the first few minutes that Krugman will understand in his lifetime and I’m sure Krugman spent the entire time stroking his ego, dropping names, and makign unverifiable claims. He became famous for prognosticating, so by that token shouldnt’ we wait till he call the full CYCLE correctly – TOP AND BOTTOM. Or he can admit that he’ll never call the bottom, cause he’s long the Krugman ego bubble. I understand that being in the same profession you are that much mroe affected by his douchebaggery, but i think it’s time you add him to “That” list and move on.

  12. Gravatar of Alex Golubev Alex Golubev
    31. March 2009 at 06:58

    I dont’ mean to steal your thunder, but you dont’ have an email up. i think this post is brilliant: http://populardelusions.typepad.com/popular_delusions/2009/03/behavioral-biases-and-the-futility-of-geithners-regulatory-overview.html

  13. Gravatar of Jon Jon
    31. March 2009 at 07:56

    Scott: I don’t know precisely; the number that I remember distinctly is that the mean maturity of the Fed’s portfolio was about four years before the crisis*. I believe purchases of bills versus notes its about a 50/50 split.

    If I get a chance, I’ll plot the ratio of short-term to medium-term over time. I believe that data is readily available as a memorandum item in the H4.1 weekly release.

    For a nice laugh (the graph of decline Gov debt):

    * See p. 863 of http://www.federalreserve.gov/pubs/bulletin/1997/199711lead.pdf for a table of historic maturities.

  14. Gravatar of ssumner ssumner
    31. March 2009 at 08:22

    anon1, You’re right, I did invite comments from Krugman supporters and shouldn’t have said your reply was silly. I am so close to this, that I don’t see things as others do. So let’s look at your explanation. Are you saying that Krugman didn’t imply that some level of quantitative easing would boost AD? And are you saying that his support for QE doesn’t imply that he thinks at least some level (say buying up the entire world) would boost prices a tiny bit? That seems like a real stretch to me, but even if that’s your argument, he contradicts it in his reply to me. Under your interpretation, Krugman would have replied to my letter by saying “yes, I have often advocated QE, but it’s not true that I think it would work.” Instead he basically just said that OMOs don’t work in a liquidity trap because you are simply exchanging money for zero interest T-bills. I’ll say it again, when someone repeatedly indicates that they favor QE as a way to try to boost AD, but worries about the possible fiscal costs, they shouldn’t criticize someone else who basically says “Unless I am mistaken, you think some level of QE would boost AD, but you worry about the possible fiscal costs.”

    Given his views, if you think his reply to me was reasonable, then we’ll just have to agree to disagree. Now if it turns out that Krugman believes that buying up all of planet earth with money off the printing press would not boost prices a tiny bit, then I will withdraw my complaint. And make a different criticism.

    Finally, I strongly disagree with your explanation that Krugman favored the policy for reasons of credit risk, and so does Krugman. Here’s what he says:

    “The Fed is, however, creating a new liability: the monetary base it creates to buy these bonds. In effect, it’s printing $1 trillion of money, and using those funds to buy bonds. Is this inflationary? We hope so! The whole reason for quantitative easing is that normal monetary expansion, printing money to buy short-term debt, has no traction thanks to near-zero rates. Gaining some traction “” in effect, having some inflationary effect “” is what the policy is all about.”

    Notice the last 7 words, not just that one purpose is to boost AD, but that’s what it’s all about. And he favors it, despite the risk that it will cost the taxpayers hundreds of billions in capital losses. Is it really likely that he would do so, despite the huge costs, if he thought the mechanism wasn’t effective at all, even if pushed to the most extreme levels (which is what I hypothesized in my letter which he criticized.) Again, if Krugman has views that are different from what I claimed, then he should say precisely what he favors. I never claimed Krugman thought buying a trillion in bonds would boost AD, I never claimed he thought buying $100 trillion in bonds would boost AD, but I did claim he implied SOME level of QE would boost AD, and I still say he implied that.

  15. Gravatar of anon1 anon1
    31. March 2009 at 09:42

    I agree there are too many interdependencies for his story to be (completely) consistent or wiggle-free.

    E.g. if fiscal policy in a liquidity trap is effective but monetary policy isn’t, the assumption must be that the benefit of deficit financing is unrelated to the purchase of government debt by quantitative easing, which seems to be a logical stretch.

    In general, I think his reply to you was almost disrespectfully circuitous and sloppy. I’m just probing it.

    I have one last question. Is it possible he thinks of both fiscal and monetary policy effectiveness in the sense of real GDP, and defines ineffective monetary policy that way? That wouldn’t preclude an inflation and nominal GDP effect in a liquidity trap, would it?

  16. Gravatar of ssumner ssumner
    31. March 2009 at 10:49

    alex, Thanks for the Krugman link, and also the one on market efficiency. The latter is similar to mine, as you say. I knew about the Krugman stuff from the late 1990s. he seems to have become more skeptical of monetary policy since then–and he has that right. But I still think he is letting his preference for bigger government subtly affect his views on the possible efficacy of monetary policy. The $200 billion cost he cites (which is higher than I think plausible), is small compared to the various costs we will incur (fiscal stimulus plus bailouts), from not getting much faster NGDP growth. Econbrowser has new OECD estimates on growth, which are very, very, bad; probably much worse than the Fed’s internal forecast. If the OECD is right, then the situation is probably far worse than even I thought. (I had assumed that 3% real growth and 1% inflation might resume next year. They say NGDP growth will still be very low in 2010.)

    Jon, Thanks for the info. If the split is anywhere near 50/50, then that’s certainly not the impression one often gets from discussions of liquidity traps. That compliments my argument that many economists know little about what really happened in the U.S. in the 1930s and in Japan more recently.

    anon1, As I said in the previous post, I overreacted to your valid questions. I think we have ended up with similar views. On the real vs. nominal issue, that’s a fallacy I see from lots of people. But Krugman’s much too smart for that. He knows that both (non-supply side) fiscal and monetary policy boost AD, and that the breakdown between output and prices is determined by the SRAS. And I’m sure he and I would have similar views on that question, we would both view any extra AD right now as having a significant real effect, whatever the source of the higher AD. So I have no disagreement with Krugman on that score.

  17. Gravatar of Tom Tom
    1. April 2009 at 04:44

    Ah, I see that Scott Summer has a blog where he purports to discuss the facts and not get bogged down in ad hominem
    mind reading of those with opposing views.
    Oh well…

  18. Gravatar of ssumner ssumner
    1. April 2009 at 06:39

    Tom, Most of what you call mind reading is nothing more than drawing inferences about what Krugman believes from what he wrote. How else can we know what people think other than by what they wrote? The only exception I can think of is my speculation that Krugman might have been subtly influenced by his preferences for big governemnt. That was based on:

    1. His monetary theories suggest that credible monetary policies are highly effective, even when rates hit zero.

    2. Despite point one, in his blog he persistently downplays what monetay policy can accomplish, often making some fairly blanket assertions that monetary policy can’t do much more.

    3. He has advocated a much bigger government for several years now.

    4. His turn to the left on the role of government has roughly coincided with his increasing skepticism about monetary policy.

    So yes, linking all these together involves a bit of mindreading. I hope people try to read my mind when they read my blog, that is make a sincere effort to understand what I am trying to say. So I am guilty as charged. If people see subtle bias in my thinking, please add it to the comment section so that I can do better in the future.

  19. Gravatar of Boonton Boonton
    1. April 2009 at 12:20

    This is perhaps a bit of a lawyerly defense but while, Krugman did raise the possibility that the assets the Fed buys with ‘quantitative easing’ could lose value he didn’t say he was concerned with it. In the example he cited where the Fed increases money supply by $1T by buying 30yr bonds at 2.5% it is still able to sell the bonds for $800B at 5%. If the Fed had to lower the monetary base it could still accomplish most of that by selling even assets that depreciated in value.

    If it became very important to keep decreasing money even after selling off the bonds for $800B Krugman says the Fed can ‘get those assets from the Treasury’. Indeed the Treasury could simply print up some 30 year bonds, give them to the Fed and the Fed could sell them until it raised $200b.

    I think Krugman should have acknowledge where you were getting the idea that depreciated assets might cause some complications for the Fed., but to be fair Krugman did not depict that as a source of concern.

  20. Gravatar of Matthew Fraioli Matthew Fraioli
    1. April 2009 at 14:13

    Professor Sumner,

    I am sure you have felt a bit disheartened with some of the sarcastic comments you have surely read (including Krugman’s response IMO).

    Please know that you have a ton of supporters (just read some of the comments to Krugman’s response) that find your analysis and explanations both intelligent and insightful.

    I have been following your blog closely and will continue to do so.

    And a note to those sarcastically critical of Dr. Sumner’s analysis: I would sincerely appreciate links to your own thorough analysis on the topics being discussed. It’s one thing to respectfully disagree and refute Dr. Sumner’s arguments, but the sarcastic comments to someone who is taking his time to both thoughtfully and thoroughly discuss his views is disrespectful, unprofessional, and unneeded.

  21. Gravatar of Bill Stepp Bill Stepp
    1. April 2009 at 14:45

    When you combine a contortionist with a liar, what you get is Krugman.

  22. Gravatar of ssumner ssumner
    1. April 2009 at 15:45

    Boonton, Actually I think you misunderstood Krugman, if I understand you correctly. That $200 billion is a loss to the government which is a burden on the taxpayer (now or in the future). If the government just prints up more T-bonds they have to sell them to the public (tax liability) or to the Fed–which would cause inflation. But Krugman assumed (correctly in my view) that the Fed wouldn’t want very high inflation in the future. I completely agree with the technical aspects of Krugman’s argument–and think I understand it, but others can say something if they thought Krugman wasn’t worried about the $200 billion loss. He’s mentioned it in several posts. If someone else agrees with your view, I’ll reread his various posts and see if I misinterpreted him.

    Thanks for the support Matthew, I don’t worry about the sarcastic comments I get. It comes with the territory. I certainly poke fun at Krugman more than other economists. I suppose it’s a combination of him being famous, him being very tough on other economists, and his response to my letter. But it’s not as personal as it seems. I’d love to sit down with him and talk liquidity traps for an hour. I hope you’re doing well.

  23. Gravatar of Boonton Boonton
    2. April 2009 at 06:28

    Boonton, Actually I think you misunderstood Krugman, if I understand you correctly. That $200 billion is a loss to the government which is a burden on the taxpayer (now or in the future).

    I’m not sure it’s a burden. The $200B ‘loss’ to the Fed just means that the Fed is only able to take $800B out of the money supply in the future whereas in the past (or right now) they were able to inject $1,000B. If you can contract $800B are you likely to really need to contract the other $200B? Maybe not.

    But the amount of money the economy ‘needs’ to remain stable both in terms of prices and employment seems like an erractic variable. It’s possible that the Fed, to fight off inflation, might need to someday need to contract money more than it can sell its assets for.

    In that case there would be a loss to the taxpayers. The Treasury would have to create bonds and give them to the Fed who will sell them to suck money out of the economy. The Treasury (i.e. taxpayers) would then have to pay the interest on those bonds and principle when they mature but the Treasury would not have the cash it normally gets when it sells bonds. (Then again if inflation is picking up hopefully tax receipts are booming & if we don’t have stagflation the economy will be back to full employment).

    The danger of a loss to the taxpayers would require:

    1. The Fed previously created money by purchasing assets that are either not very liquid or that can vary in price. So shares of AIG, loans to big banks and 30 yr T bonds fit that bill. The traditional asset of the Fed, 3 month t-bills, do not vary much in price because of their quick maturity.

    2. When the Fed tries to contract, it finds that it cannot contract enough by simply selling the assets it has (liquid and illiquid).

    Taxpayer wise, the Fed and Treasury are two accounts. The taxpayers issued $1,000b in bonds and that’s what they have to pay off. If the Fed ‘loses’ $200b in its trading account that is not really any different than anyone else who loses money by selling bonds before they mature. The taxpayers still have $1,000b in bonds either way to pay off. Only if the Fed needs to pull $200b in money out of the economy will there be a true loss to the taxpayers because then their $1,000b debt will become $1,200b.

    The other idea I heard about was that the Fed could buy the inflation protected bonds. Since these would not loose value in an inflationary environment, the Fed could presumably sell them to contract the money supply without running into a situation where there is too much money floating around but nothing to sell to soak it up. I guess the only danger spot then would be if there was some case where the Fed needed to contract money but an inflation protected security could not sell in the market. I’m not sure if that is possible.

  24. Gravatar of Boonton Boonton
    2. April 2009 at 11:30

    Well this depression has taught us about unconventional monetary stimulus it occurs to me that we may, in the future, have to consider unconventional monetary contraction. If the Fed has to contract the money supply but the assets it holds cannot be sold for cash in the market, then it would seem to me a simple solution would be to divert tax dollars directly into the Fed’s vaults.

    It’s kind of interesting that when pushed to the extreme monetarism begins to look a bit like Keynesian economics. The difference between fiscal and monetary policy gets a bit blurry when the Fed is, say, buying up auto loans in the market to inject cash and the Treasury is giving out tax rebates for people who buy new cars.

  25. Gravatar of ssumner ssumner
    2. April 2009 at 16:43

    Boonton, I think I understand your point better. oringinally Krugman was assuming that if you injected 1 trillion to deal with the liquidity trap, later you might get away with only needing to pull $800 million back out. So no loss. There are several ways of looking at this. In order to be able to keep the extra money in circulation, one of two things would occur:

    1. Prices would stay stable, because with growth over time the money supply consistent with the Fed’s goals will gradually grow. In that case, there would be no loss, but you’d be foregoing the $200 billion in seignorage profits that normally come with a growing economy. So that’s one way of looking at it. I’m actually somewhat sympathetic to your point, because even on my interpretation, the foregone profit looks fairly small compared to the debts we are running up in fiscal policy

    2. The other possibility is that real money demand doesn’t grow, but you leave the extra $200 billion in circulation anyway. In this case you get a higher price level (about 25% higher) witch is a sort of inflation tax on current holders of all the Federal Reserve notes (normally about $800 billion in circulation.) Of course many perhaps most of these are foreigners and those in the underground economy–so that’s another issue.

    The two policies do seem to blur, but I don’t think it is inevitable. Rather it’s a sign of inept monetary policy that got us into this mess. We never should have let banks hoard $800 billion. And if we had moved aggressively enough to keep inflation expectations positive, far less money creation would be need today. I think it could be done with much smaller losses that what Krugman entails if done intelligently. And I also think the losses would be trivial compared to fiscal policy. But your general point about the two seeming to blur together has some validity.

  26. Gravatar of Boonton Boonton
    5. April 2009 at 08:54

    Calculated Risk quotes Krugman http://www.princeton.edu/~pkrugman/optimalg.pdf making another interesting point about this:

    But what if the required nominal rate is negative? In that case monetary policy can’t get you there: once the interest rate hits zero, people will just hoard any additional cash – we’re in the liquidity trap. The only way to make monetary policy effective once you’re in such a trap, at least in this framework, is to credibly commit to raising future as well as current money supplies.

    Consider the $1T spent on 30 year bonds. If interest rates rise, as in Krugman’s hypothetical, the value of those bonds may fall by $200B leaving the Fed unable to pull the full $1T out of the economy. BUT maybe the bug isn’t that the Fed can only pull out 80% of the newly created money but that the Fed CAN pull out 80%. If the market knows the Fed can pull that money supply out almost as fast as it pushed it in it may not trust the additonal money…hence it gets hoarded rather than used.

    To me this seems like an argument for fiscal stimulus. Gov’t borrows $1T, spends $1T and Fed creates $1T by buying long term debt. Unlike simply creating $1T which may end up hidden in bank vaults, the gov’t will spend the $1T in stimulus. The banking system can’t easily hoard the newly created cash.

    Whatcha think about that?

  27. Gravatar of ssumner ssumner
    5. April 2009 at 15:55

    boonton, I’ve argued that the temporary vs. permanent problem is much more serious for fiscal policy than monetary policy. It’s easy to make monetary expansion permanent—just set a credible inflation target path. Fiscal expansion CANNOT be permanent, because of the government’s budget constraint. People are very pessimistic, and are saving a lot more. Is that any surprise based on what they read in the newspaper about deficits? Also see my most recent post on monetary and fiscal policy.

  28. Gravatar of Boonton Boonton
    5. April 2009 at 18:02


    What is really permanent here? It’s pretty easy to imagine the Fed turning around and selling all those 30 yr bonds ASAP taking $800B out of the economy really fast. I can’t easily see an $800B tax increase or spending cut (that’s $800B in one year….not over a 4,5 or 10 year period added together) passing Congress easily….unless maybe there are UFO’s over Washington DC threatening to blow up the world.

    Normally it’s good that the Fed can become restrictive so fast. That provides assurance that inflation can be checked quickly. But is the Fed trustworthy if the job is to set a positive inflationary target? Maybe not so much.

  29. Gravatar of Taylor Taylor
    6. April 2009 at 07:20

    Do you guys have a recommendation section, i’d like to suggest some stuff

  30. Gravatar of ssumner ssumner
    6. April 2009 at 17:26

    boonton, Again, monetary policy may be temporary (as you say) but fiscal policy has to be, unless they plan to default. I think most Americans are expecting big tax increases, and I think they are right to expect them–they are coming.

    Taylor, maybe I’ll do that later, but you can recommend things in the comment section (with more readers if its a recent post.)

  31. Gravatar of rob rob
    16. July 2009 at 13:38

    I just read this full exhange and the krugman post for the first time and came to the same conclusion as boonton, that krugman’s point was that we was not concerned w capital losses, even tho he has pointed out they might result. it took me a long time to piece together that that was his point, but im pretty sure it was. but it were as if he went right for the one assertion u made that he could easily disagree with. it was a petty response. he should have said, scott, the problem w your letter is i completely agree w you.

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