A bit of backround, from a March '11 post:
...Professor Krugman has been adamant in his defense of QE2. Back in February he said the uprising in Egypt was caused by higher food prices which in turn were caused by global warming not by the Federal Reserve. He specifically mentions the drought in Russia last summer. NOAA disagrees with Krugman's scientific theory that global warming was the proximate cause of the heatwave.Here's his latest, from the New York Times:
NOAA are proponents of a 'strong' version of Anthropogenic Global Warming Theory.
Listening to folks like Krugman can cost you serious money if you decide to, say, become a perma-bull on wheat because of global warming without learning the meteorological term 'blocking high'.
The funniest refutation of the good professor that I've heard was a precious metal short lamenting the horrible silver harvest of Jan. '11.
Here's his Feb. 6 NYT Op-ed.
Droughts, Floods and Food
May 13 10:01 AM
Commodities and Inflation
One thing I’ve been meaning to post about for a while is a common misunderstanding of what monetary doves — not just me, but also Ben Bernanke, Bill Dudley at the NY Fed, and others — believe about commodity prices and broader inflation. Specifically, I often find people assuming or asserting that for the dovish view to be proved right, commodity prices have to go back down. But that’s not at all right; the dovish view relies only on the assertion that the rapid rate of rise in prices since last summer will not continue indefinitely.
Here’s the schematic picture I have in mind:So what's the deal? did global warming just end?
The idea is that even if the recent commodity price rise is permanent, as long as it levels off it will lead only to a temporary bulge in broader inflation. And the appropriate response of the Fed is to keep calm and carry on — to fend off the inflationistas until receding inflation makes it clear that there was never a reason to tighten monetary policy.
And so far all the data have supported this view of what will happen. There has been very little evidence of commodity price rises spreading more broadly through the economy, and none at all of a wage-price spiral.
Now I know that Keenlyside's 2008 paper, which projected cooling sea surface temperatures on a decadal scale, is used by one side to argue that "No, we never said temperature increase would be monotonic" and is used by another to argue that "If everything that ever happens is compatible with AGW theory then your theory isn't falsifiable and then, by definition isn't science". So what is the Krugmeister up to?
Note his phrasing. He is setting up a future argument where he can claim he was right no matter what the future holds.
That kind of intellectual dishonesty is completely worthless to a commodity trader operating in an environment where the margin clerks will show your hypothesis to be falsifiable on a daily basis.
Back in February I said:
...Here's a schematic of his argument:
global warming>causing bad weather>causing crop failure>causing increased food prices>causing riots.Leaving the science and the politics aside there is one reason to be wary of Krugman:
Listening to ideologues will cost you big money.If his argument was in any way correct the situation could not, would not [please don't do the Dr. Seuss thing -ed] reverse such that major commodities drop 20% in 48 hours (and if you annualize that...)