Paul Krugman, the Nobel Prize winning economist and
New York Times columnist has been wrong on gold prices for at
least a decade. He says gold is in a bubble.

He says that people who buy gold are either fools taken in by Glenn Beck
or, as in the case of Beck himself, are actually fraudsters who are
front-running people foolish enough to buy gold.

He actually believes that Glenn Beck’s advertisements with Gold Line might
be the reason why gold is so high in price right now. The fact
that India, China, South Korea, and Indonesia are buying literal tons of
gold every year? Nah, that couldn’t be it…

The fact that paper currencies around the globe are circling the drain?

For the record, I’m not a fan of Glenn Beck, and I can’t think of a worse
retailer to buy gold from than Gold Line… but I digress.

Now, being that Krugman is a Nobel Prize winning economist, who is also
Yale educated in that same field, you’d think he would be an expert on the
behavior of bubbles.

And you’d be correct! Sort of.

You see, Krugman is a pillar of Keynesian and Modern Monetary Theory, which
is based on some interesting mathematical models, but really has just been
used as the reason why deficit spending is a-okay. Another way to look at
it is that Keynesian theory puts an academic face on the brutal policies of
statism and socialism. The state CAN run massive deficits, because it
should, because it’s the state, and the state should have a monopoly on all
assets, especially money.

But Krugman has written at length about bubbles – not just the gold bubble
– most notably in the run-up to the real estate bubble throughout the last

Unfortunately, he was WRONG on the real estate bubble.

In fact, throughout the 2000s, he was calling for ever-lower rates in an
attempt to prevent speculative bubbles in a variety of assets – seemingly
and completely blind to the fact that low rates might encourage real estate

Here’s a short list of quotes from Krugman (hat tip to the Ludwig Von Mises blog) on lowering interest rates
to spur the housing sector…

“It’s still not clear that Mr. Greenspan has caught up with the curve –
let’s have at least one more rate cut, please – but the interest-rate cuts
do, cross your fingers, seem to be having an effect.” – May 2, 2001

“Housing, long-term rates haven’t fallen enough to produce a boom there.” –

“…economic policy should encourage other spending to offset the temporary
slump in business investment. Low interest rates, which promote spending on
housing and other durable goods, are the main answer.” – 10/7/2001

There are plenty more quotes from Krugman on housing and interest rates,
and he was completely wrong.

Instead of taking a giant step backwards and realizing that his school of
thought was completely wrong on interest rate policy, he’s now attacking

And he’s on the wrong side of gold prices too.

Don’t get me wrong, I think we’ll see gold prices hit bubble territory at
some point. But Krugman has been early in making this call, and when you’re
early in economics, you’re just wrong.

I don’t know what the next bubble will be, but he’ll probably be wrong on
that one too. Maybe it will be the bond market, or real estate again or
energy stocks – but he’ll be wrong on it because the entire field of
Keynesianism and Modern Monetary Theory is getting throttled by the

When you base all of your thinking on bad ideology, it makes it difficult
to come to correct conclusions. I know that Krugman has probably forgotten
more about international trade and geographic economics than I’ll ever know
(those are the fields he won his Nobel Prize in) but his ideas about money
systems are crumbling around us as I write this letter.

If the dollar was a house, we’d be running out of it right now, because the
roof is collapsing. That’s exactly why the price of gold is rallying right

Instead of continuing to tell everyone what a great architect he is,
Krugman should be heading for the exits too.

Published by Wyatt Investment Research at