In a few recent blog posts, Paul Krugman used bar graphs and tables to (allegedly) prove the superiority of his views over those of the Austrians. Yet, as I’ll show in this article, I can use Krugman’s own data to demonstrate the exact opposite.
Krugman on the Fed and Banking Panics:
Perhaps spurred by his Bloomberg debate with Ron Paul, Krugman posted the following regarding financial panics and the US central bank:
There’s a very widespread belief on the right that banking crises only happen because either the Fed or Barney Frank cause them; go back to a gold standard, and there would be no need for financial regulation or anything like that.
This is, of course, nonsense; Walter Bagehot knew all about financial crises, which have been a constant feature of modern economies since at least the early 19th century. Just to drive the point home, I thought it might be worth posting Gary Gorton’s chart (pdf) of “panics” before the Fed went into operation:
CONTINUED at the Ludwig von Mises Institute. Written by Robert P. Murphy.