Wrong, that is in that he failed to appreciate his own his immense genius, and wrong in that he failed to appreciate that the progressive left wing account of economics was ever more staggeringly true than he thought it was:
According to him, he was wrong to think that:
highly leveraged banks had control over their risks. With people like Stanley Fischer and Robert Rubin in the office of the president of Citigroup, with all of the industry’s experience at quantitative analysis, with all the knowledge of economic history that the large investment and commercial banks of the United States had, that their bosses understood the importance of walking the trading floor, of understanding what their underlings were doing, of managing risk institution by institution. I thought that they were pretty good at doing that.
Funny about that. What those not under the thumb of Cathedral, such as the Israeli Central Bank and the Chinese seem to think is that he was wrong about was to imagine that the state could direct great barrels of mortgage money deadbeat borrowers with any prospect of the money being paid back.
According to him, he was wrong to think that:
that the Federal Reserve had the power and the will to stabilize the growth path of nominal GDP.
that no advanced country government with as frayed a safety net as America would tolerate 10% unemployment. In Germany and France with their lavish safety nets it was possible to run an economy for 10 years with 10% unemployment without political crisis. But I did not think that was possible in the United States.
Which is a roundabout way of saying he was not wrong to think that the government could cure unemployment by printing lots of money and spending it, and the fact that it has printed vast amounts of money and spent it, causing only inflation and not restoring employment, is proof that the government is not spending enough money. The treatment, he tells us, is just fine, just needs to applied more vigorously.
And he was also wrong to think that other economists were as smart as he was:
I did not think that there were any economists who would look at a 10% shortfall of nominal GDP relative to its trend growth path and say that the government is being too stimulative.
It seems that all these other silly economists were so silly that they accurately predicted what the results of the governments policy would be – stagflation.
Official government inflation is still near zero, but the inflation people see when they do their shopping is quite shocking.