Archive for the ‘Krugman’s Blog’ Category

Krugman’s blog, 9/1/14

September 2, 2014

There was one post yesterday, “Inflation, Septaphobia, and the Shock Doctrine:”

The bad news from Europe is a reminder that the basic insight some of us have been trying to convey, mostly in vain, ever since 2008 remains valid: the great danger facing advanced economies is that governments and central banks will do too little, not too much. The risk of elevated inflation or fiscal difficulties is dwarfed by the risk of ending up trapped in a deflationary vortex. This view has been overwhelmingly supported by recent experience — if you acted on what they were saying on CNBC or the WSJ editorial page, you would have lost a lot of money. Yet the power of the hard money/fiscal austerity orthodoxy (yes, market monetarists want one without the other, but they have no constituency) remains immense. Why?

I’m currently mucking around on the political economy of hard money/austerity — looking at the available data, trying out various stories, to see how they work. This post is mainly notes to myself.

One thought I’ve had and written about is that the one percent (or actually the 0.01 percent) like hard money because they’re rentiers. But you can argue that this is foolish — that they have much more to gain from asset appreciation than they have to lose from the small chance of runaway inflation. In fact, if you compare stock prices in the US, with its aggressively easing Fed, with Europe, you can see the difference:

But maybe the 1% doesn’t make the connection?

An alternative is selective historical memory. Some time ago Kevin Drum suggested that it’s all about septaphobia, fear of the 1970s. And it’s true that the 70s were a really bad time for investors, although not nearly as bad for workers as the post-2008 era:

Robert Shiller

But weren’t the one percent equally devoted to the gold standard in the 1930s, with no Jimmy Carter in their past? And why does the inflation of 1979 remain seared in memory, while the boom after Volcker loosened money in 1982 is forgotten? (This is like the question of why Germans remember 1923 but not Bruening.)

Finally, there’s the notion that it’s implicitly about politics: crises are a chance to force “reforms” that strip away worker protections and the welfare state, and any suggestion that technical solutions, monetary or fiscal, could do the job is rejected.

The thing is, it sure looks like a form of false consciousness on the part of elite. But I’m still trying to figure it out.

Krugman’s blog, 8/30/14

August 31, 2014

There were three posts yesterday.  The first was “Day of IMFamy:”

Two pieces I did for the IMF are online. First, my Mundell-Fleming lecture, on the possibility or lack thereof of Greek-style crises in countries that borrow in their own currencies. Second, a set of brief notes from various recipients of the Swedish thingie.

Conclusion of the M-F lecture:

[C]laims about the vulnerability of floating-rate debtors to crisis haven’t been given any specificity because they do not, in fact, make sense. Simple macroeconomic models suggest that a loss of confidence in a country like the United States, taking place at a time when interest rates are at the zero lower bound, should, if anything, have an expansionary effect. Nor can one appeal to the lessons of history: cases resembling the hypothesized crisis scenario are rare, and those that exist don’t support the notion that Greek-style crises can take place under a very different currency regime.

You may find it implausible that conventional wisdom, backed by so many influential people, could be wrong on so basic a point. But it’s not the first time that has happened, and it surely won’t be the last.

Yesterday’s second post was “Scylla, Charybdis, and the Euro:”

I’ve been talking to some people I respect about the fate of the euro, and specifically yesterday’s column, and it seems to me that the key issue here involves the balance of risks.

Think of it as Scylla and Charybdis. On one side, there is the risk of seeing European economies dashed against the rocks of debt crisis; on the other, the danger of seeing Europe pulled down into a vortex of deflation.

For the past four years European policy has been dominated by a completely one-sided assessment of these risks: imminent debt disaster (90 percent omg), and nothing to worry about from austerity — the Confidence Fairy will take care of it. But there is a more sober, serious position which considers the shoals of debt a serious risk, and the vortex of deflation not yet too threatening.

As you might guess, I have a different view. Now that the ECB is willing to do its job as lender of last resort, the debt threat is much less pressing than previously portrayed — and I have been arguing all along that for non-euro countries it’s not a threat at all. Meanwhile, I’m terrified about that vortex; Europe may still be circling the drain fairly slowly, but inflation expectations have become unmoored, actual inflation is falling, the recovery, such as it was, has stalled. And by the time the downward spiral becomes undeniable it may well be irreversible.

Could I be wrong? Of course. But economic policy always involves balancing risks, and I think we should be much more afraid of a European depression than we are of fiscal crisis.

Yesterday’s last post was “And Fairly Won:”

One hundred fifty years ago today, William Tecumseh Sherman’s corps, which had pulled back from in front of Atlanta — deceiving the Confederates into believing that they were in retreat — were scything around south of the city, cutting the rail lines. Hood’s army got away, but the victory was nonetheless decisive, for political reasons: the fall of Atlanta convinced voters that the war could and would be won, and Lincoln was reelected.

I’ve written before about my U.S. Grant obsession; Sherman, too. And the friendship between these two men — men who had no illusions about war, who understood the modern world and did what had to be done — is, to my mind, one of the great stories of American history.

And thanks to Gen. Sherman for not burning Savannah…

Krugman’s blog, 8/29/14

August 30, 2014

There were three posts yesterday.  The first was “Austerity and the Hapless Left:”

In today’s column I am not nice to Francois Hollande, who has shown about as much strength in standing up to austerians as a wet Kleenex. But one does have to admit that he’s not alone in his haplessness; where, indeed, are the major political figures on the European left taking a stand against disastrous policies? Britain’s Labour Party has been almost surreally unwilling to challenge Cameron/Osborne’s core premises; is anyone doing better?

You can complain — and I have, often — about President Obama’s willingness to go along with belt-tightening rhetoric, the years he wasted in pursuit of a Grand Bargain, and so on; still, the Obama administration, while it won’t use the word “stimulus”, favors the thing itself, and in general American liberals have taken a much more forthright stand against hard-money, balanced-budget orthodoxy than their counterparts in Europe. Economists, in particular, have taken a much stronger stand. In Britain there are, to be sure, some prominent anti-austerity voices — Martin Wolf, Jonathan Portes, Simon Wren-Lewis, and I’m sure there are others I’m missing. But they don’t seem to have anything like the weight in the debate that Larry Summers, Alan Blinder, and many others have here.

Why the difference? I don’t really know. I have a couple of hypotheses. One is that the US intellectual ecology seems much more flexible: here, serious economists with celebrated research can also be public intellectuals with large followings, and even serve as public officials; and they can provide at least some counterweight to the Very Serious People. Think Larry Summers, but also Janet Yellen (and before her Ben Bernanke), and in a somewhat different way yours truly. Such people aren’t totally absent in Europe — Mervyn King was an academic central banker, and so in a way is Mario Draghi. But there’s much more of that in the US.

Another hypothesis is that American liberals have been toughened up by the craziness of our right, and in particular by the experience of the Bush years. After seeing the Very Serious People lionize W, a fundamentally ludicrous figure, and cheer on a war that was obviously cooked up on false pretenses, US liberals are more ready than European Social Democrats to believe that the men in good suits have no idea what they’re talking about. Oh, and America does have a network of progressive think tanks that is vastly bigger and more effective than anything in Europe.

But I’m just making suggestions here. The haplessness of the European left is still something I don’t fully understand.

Yesterday’s second post was “Germany’s Sin:”

Simon Wren-Lewis has two very good posts about the European situation, first laying out the problem, then taking on those who don’t get it. I just want to add a bit to one of his key points: the impossibility of a resolution unless Germany accepts higher inflation.

In Germany, there’s a strong tendency to moralize, with appeals to the country’s own recent economic history. We pulled ourselves out of our late 90s doldrums, the Germans say, so why can’t Southern Europe do the same?

But a key part of the answer is that Southern Europe now faces a much less favorable environment than Germany did then — and Germany is the reason why.

Look at core inflation (excluding energy, food, alcohol, and tobacco). During the years when Germany was gaining competitiveness, euro area inflation was running at around 2 percent, and inflation in Southern Europe was running considerably higher. So Germany could gain competitiveness simply by having lowish inflation — no need to actually deflate. But these days German inflation is only one percent, euro area inflation is lower, and the only way for Southern Europe to gain ground is to have zero or negative inflation:

Eurostat

This makes the adjustment problem incredibly difficult, both because wages are downwardly sticky and because deflation worsens the debt burden. Add onto this the fact that the eurozone as a whole remains depressed thanks to fiscal austerity and inadequate monetary expansion, and Germany is in effect demanding that Spain and others accomplish a task vastly harder than the Germans themselves had to achieve.

And the worst of it is that there’s no sign that Berlin understands, or is willing to understand, this reality. And if the euro fails, that refusal to think clearly will be the fundamental cause.

The last post of the work week was “Friday Night Music: Rodrigo y Gabriela:”

Boy, am I behind the curve here — didn’t even know they existed, and they turn out to have a huge following and have just appeared on Letterman again. But anyway, quite something (and very different):

Krugman’s blog, 8/27/14

August 28, 2014

There were three posts yesterday.  The first was “The Way We Ate (Personal):”

The first time I had to cook for myself was the summer between my junior and senior years, when I was working for Bill Nordhaus on this paper (pdf); I shared a very beat-up apartment in New Haven, and tried, sort of, to do some of the cooking. To help, my mother bought me the Betty Crocker Good and Easy cookbook. And I have often told people about the, um, interesting recipes. But was my memory embellishing? Strangely, it never occurred to me to check it out on the intertubes. But I finally did — and no, I wasn’t making any of it up:

1 pound ring bologna
Cherry Pineapple Glaze (Below)
Potato Buds instant puffs (enough for 4 servings)

Cherry Pineapple Glaze
1/2 cup crushed pineapple
1/4 cup coarsely chopped maraschino cherries
1/4 cup light corn syrup
2 tabelspoons white vinegar
1/4 teaspoon cloves
2 drops red food color
1 1/2 teaspoons water
1 1/2 teaspoons cornstarch

Dear sweet Baby Jesus on a tricycle — it’s a wonder he’s still alive.  The second post yesterday was “Stockholm Syndrome in Paris:”

Sure enough, President Hollande has finally shown some steel — moving forcefully to suppress critics of his slavish adherence to the austerity demanded by Germany and Brussels.

The question I would ask is, what do Hollande and his inner circle think will make the situation turn around? Europe’s austerity drive has now gone on for four years; over the course of those four years the euro area has seen economic recovery shrivel, a much-touted comeback also stumble, and now a slide toward deflation. French economic performance tends to track the eurozone average; why should anyone expect France to come roaring back?

I’ll try to produce a more systematic analysis later today or tomorrow; but does anyone think that the Élysée Palace has a well-thought-out vision of how ever more austerity is going to produce a French renaissance? It’s just stumbling along day by day, waiting for something to turn up — when it’s much more likely that everything will turn down instead.

Yesterday’s last post was “What’s the Matter With France?:”

As I mentioned this morning, France’s President Hollande, after years of passivity, has finally taken strong action – firing anyone who questions his subservience to German and EC demands for ever more austerity. But what’s actually going on in the French economy? It is, of course, a catastrophe – hugely uncompetitive, failing to create jobs, etc. etc. – that’s what everyone says, so it must be true, right?

Actually looking at the data, however, reveals a number of surprises.

Let’s start with jobs. France has low labor force participation by the relatively old, thanks to generous retirement programs, and by the young, partly because generous aid means that few need to work while in school, partly perhaps because a high minimum wage and other factors discourage youth employment. What about prime-age workers? Figure 1 compares France and the United States. It’s a good thing we know that France is the country in crisis, isn’t it? Because otherwise you might get confused by employment performance that looks much better than ours.

Figure 1

Figure 1

Still, we know that France is highly uncompetitive on world markets. Figure 2 shows the French current account balance as a percentage of GDP, which is in, um, mild deficit, nothing like the deficits the United States ran during the “Bush boom”.

Figure 2

Figure 2

It’s interesting to note, by the way, that in the great European divide during the euro’s boom years, when costs in southern Europe surged relative to Germany, creating a huge problem of adjustment, France was – as you can see in Figure 3 – right in the middle, with no particular sign of getting out of line. This puts it in a somewhat awkward situation now that southern Europe is deflating while Germany refuses to inflate, causing an overall deflationary bias in Europe. But this isn’t a French problem so much as a euro problem.

Figure 3

Figure 3

Speaking of deflation, France – as you can see in Figure 4 — is well below the conventional 2 percent target (which is too low) and falling fast. Mr. Hollande may like to say that the French problem is supply-side, but it sure looks like demand-side by this criterion.

Figure 4

Figure 4

Still, France has to worry about bond vigilantes. After all, international investors are so worried about French prospects that they won’t lend to the country without being paid … well, the lowest rates in French history (Figure 5).

Figure 5

Figure 5

OK, you get the picture. French economic data look nothing at all like the story everyone tells. Yes, you can tell stories of excessive regulation, but they don’t dominate the macro picture. Yet Mr. Hollande is meekly going along with demands for ever more belt-tightening, reserving his wrath for those who want France to stand up for itself. And the result is a sort of multiplier process in which austerity causes growth to falter, which worsens the budget prospect, which leads to even more austerity.

What’s going on here politically? Simon Wren-Lewis makes a very good point. In America, many of the people who shape economic discourse are forever living in the 1970s, when stagflation was the order of the day; in France, the corresponding nightmare is the early Mitterand era, when France was suffering from Eurosclerosis and an attempt to pursue unilateral fiscal expansion (with a fixed exchange rate) failed. But now is not then. To an important extent, what ails France in 2014 is hypochondria, belief that it has illnesses it doesn’t – and this hypochondria is leading it to accept quack cures that are the real cause of its distress.

Krugman’s blog, 8/25/14

August 26, 2014

There were three posts yesterday.  The first was “Kingslayer Me:”

OK, this has to be the funniest headline I’ve seen for a while, on Business Insider: The French Government Has Collapsed, And It’s Partly Paul Krugman’s Fault. The French prime minister has tendered his resignation amid a dispute set off by the economy minister’s decision to go public with opposition to austerity orthodoxy, and since he cited me on the subject, Business Insider has made a funny.

The real story, of course, is the combination of the abject failure of austerity at a Europe-wide level, and the intransigence of the policy’s instigators:

The decision by French Prime Minister Manuel Valls to present his government’s resignation on Monday does not make any difference to Germany’s focus on economic policies that strive for growth, job-creation and fiscal consolidation, a German government spokesman said on Monday.

“We continue to work for stronger growth and employment and our government still believes there is no contradiction between consolidation and growth,” said deputy government spokesman Georg Streiter. “Nothing has changed with us.”

It’s hard to believe that more than four years have passed since I called out austerians for their belief in the Confidence Fairy; after all that time, and all the disastrous experiences (not to mention the collapse of whatever intellectual basis there was for the pro-austerity view), nothing has changed.

Yesterday’s second post was “Yellin, Wages, and Intellectual Honesty:”

Jared Bernstein is a bit puzzled by the piece of Janet Yellen’s talk at Jackson Hole in which she suggests that some of the weakness in wages may reflect delayed adjustment rather than unemployment. Since her message was basically that the Fed should keep its pedal to the metal for a while yet, why blur the message?

But I think I understand what Yellen was doing — and her willingness to do it underscores the asymmetry between the two sides in this debate.

Here’s how it works: If you believe that we’ve spent the past six years suffering from a huge overhang of excess supply, that inadequate demand is the whole story — as Yellen does, I do, and so should you — you do have one slightly awkward question to answer: while inflation has been subdued, why hasn’t it turned into deflation? If labor is in huge excess supply, why are average wages still rising, albeit slowly?

Doves like me have taken that question seriously, and placed a fair bit of weight on downward nominal wage rigidity. If wages don’t fall except in extreme cases, you can explain average wages continuing to rise by the combination of sticky wages for some workers and rising wages for those workers who, for whatever reason, face better-than-average prospects.

If that’s your story, however, it has other implications, including the one Yellen identified — a sort of delayed wage-depression effect that persists for a while even as markets recover. And Yellen felt compelled to mention that implication, I think basically because she wanted to make it clear that she was engaged in a good-faith analytical exercise, not trying to build a brief for the policy she wanted for visceral or political reasons.

What’s notable, then, is that you hardly ever see this kind of thing on the other side. Inflation hawks rarely lay out any specific model of how inflation is supposed to take off in a depressed economy; nor do they talk about testable implications of their view, or for that matter offer any explanation of why they’ve been so wrong for so long.

It is, in other words, an asymmetric debate from an intellectual point of view. Doves are doves because their analysis leads them to believe that rates should stay low, and they make a point of explaining that analysis, addressing its implications even if they don’t lend support to their policy case, and suggesting what information might lead them to change their mind. Inflation hawks know what they want, and don’t feel any need to explain clearly why or how they might be wrong.

If this reminds you of other debates these days, it should. It’s not just facts that have a liberal bias; so does careful, open-minded analysis.

The last post yesterday was “Real Americans and Real Economics:”

Maybe I’m deluding myself, but it seems to me that we’re not hearing as much as we used to about “real Americans” — the notion that the true essence of the nation is white people living in small towns, associated these days with Sarah Palin but also invoked by whatshisname, the guy who lived in the White House between Clinton and Obama and misled us into war. But I’m sure that’s still how a lot of people on the right see it.

What made me think about that concept is something sort of parallel I’ve noticed about the reaction to my writings. Often, I find, the most rage-filled emails and voice mails come after I’ve written something fairly economistic, like today’s piece. And typically, part of the rant is something along the lines of “You call yourself an economist?” You see, the person delivering the rant has a notion of what economics is; he (it’s almost always a he) believes that “real economics” is about singing the praises of free markets — basically Capitalism Roolz. It’s inconceivable to him that you could have a more nuanced view without being a Marxist. And he’s outraged both that I have the temerity to claim that I’m doing economics and that other people seem to take me seriously.

And it’s not just random Tea Partiers who think this way. It includes hosts of TV business shows, and some famous economists too.

What’s really odd about this view is that you could hardly imagine a time when the evidence was less supportive. We’re just coming off a dramatic economic collapse that had nothing to do with any obvious supply-side factors, but seemed obviously connected to malfunctioning markets. And in the aftermath of the collapse, the supposed real economists made a lot of predictions about runaway inflation, soaring interest rates, and so on that proved notably wrong, while the unreal types like me have done more or less OK.

In fact, there is remarkably little evidence that “real economics” is right even in normal times. The efficiency of competitive markets is a nice story, but where are the dramatically successful predictions we generally look for as confirmation of scientific theories? Indeed, the general presumption even within the economics profession that microeconomics is solid and known to be valid, while macroeconomics is flaky and dubious, seems to me to rest on prejudice rather than evidence. Yes, much of micro can be derived rigorously from individual maximization plus equilibrium; but why, exactly, does that make it right?

So, in my mind the real America is the diverse America we actually live in, and real economics is the eclectic mix of ideas and techniques that seem to be useful, whether or not they have rigorous microfoundations. And I say that as both a real American and a real economist.

Krugman’s blog, 8/23/14

August 24, 2014

There were three posts yesterday.  The first was “Another Night in Brooklyn:”

Will Butler of Arcade Fire and some guy wearing funny clothes

Will Butler of Arcade Fire and some guy wearing funny clothes

Arcade Fire at Barclays Center. I’ve been following their music more or less obsessively for years, but this was my first live concert. It’s quite an experience — watching the videos doesn’t give you anything like the feel for the sheer energy and joy, both of the band and the audience. I have to admit that the sound in a big arena is a bit murky — the bass was too loud — so it helped if you already knew and loved all the songs, which I did. Wake Up was a stunning climax, as always.

Really fantastic. Oh, and let’s hear it for the great city of New York, where the subways run all night, and a guy taking the 2 train at midnight in a monkey suit attracts no attention at all.

Yesterday’s second post was “Draghi at Deflation Gulch:”

Full disclosure: I know Mario Draghi, a bit, since we overlapped in grad school, and I both like and admire him; he did a fantastic job of containing the euro crisis of 2012. And I like to imagine that he knows and understands more than he can say in his position. Still, I don’t think I’m projecting too much in reading his Jackson Hole speech as the words of a man who knows perfectly well how dire the situation is, and is sailing as close to the wind as he can, but is all too aware of how inadequate that’s likely to be.

Although he gives a nod to structural factors, he effectively declared that people in Europe are exaggerating the problem:

Research by the European Commission suggests that estimates of the Non-Accelerating Wage Rate of Unemployment (NAWRU) in the current situation are likely to overstate the magnitude of unemployment linked to structural factors, notably in the countries most severely hit by the crisis

and he basically says that the problem with the euro is inadequate demand:

The most recent GDP data confirm that the recovery in the euro area remains uniformly weak, with subdued wage growth even in non-stressed countries suggesting lacklustre demand. In these circumstances, it seems likely that uncertainty over the strength of the recovery is weighing on business investment and slowing the rate at which workers are being rehired.

So he’s effectively saying the same thing as Janet Yellen: if unemployment is structural, where are the wage gains?

Also, the confidence fairy has vanished from official ECB rhetoric. So has the ECB’s trigger-happiness when it comes to any hint of inflation:

The risks of “doing too little” – i.e. that cyclical unemployment becomes structural – outweigh those of “doing too much” – that is, excessive upward wage and price pressures.

The trouble is, what can he do about it? He appeals for a consideration of euro-wide measures of fiscal stance, which is basically urging Germany to run bigger deficits, but the Germans aren’t interested. He says that the ECB will do more, but doesn’t promise massive QE, probably because he knows he can’t.

The point is that even if Draghi is, as I believe he is, a good man and a good economist who gets the situation, the combination of the euro’s structure and the intransigence of the austerians means that the situation remains very grim.

Yesterday’s last post was “Attack of the Crazy Centrists:”

I’m by no means the only person, or even pundit, who sometimes (often) feels that centrists are the craziest people in our political life. Liberals these days rarely stake out really extreme positions (more on that in a minute); conservatives may denounce Obama as a Muslim atheist communist, but at least they know what they want. The really strange people are those who insist that there is symmetry between left and right, that both are equally far out and equally at fault for polarization, and make up all kinds of strange stories to justify this claim.

Barack Obama is, of course, the biggest target of these delusions; it’s really amazing to see pundits accuse him of being chiefly to blame for Republican scorched-earth opposition — you see, he should have used his mystic powers of persuasion to bring them into the tent. But liberal commentators also get hit — usually via gross misrepresentations of what we said. And of course I get this most of all.

Today Jonathan Bernstein leads me to Andrew Gelman, who catches an assertion that I’m all wrong about the difference in conspiracy theorizing between left and right.

What I said was that conspiracy theories are supported by a lot of influential people on the right, but not on the left. They misrepresent this as a claim that most conspiracy theorists are on the right, and point to evidence that “motivated reasoning” is equally common on left and right as proof that I’m wrong.

This is doubly wrong. For one thing — Gelman doesn’t say this as clearly as I’d like — motivated reasoning isn’t the same thing as conspiracy theorizing. Believing that official inflation numbers understate true inflation, based not on understanding the data but on political leanings, is motivated reasoning. Believing that the BLS is deliberately understating inflation and unemployment as a political favor to the White House is a conspiracy theory.

And there’s a big difference even when it comes to conspiracy theorizing between having something believed by some, maybe even a lot, of people and having it stated by influential politicians and other members of the elite.

So how did my claim about elites and conspiracy theories — which I think is very defensible, even obvious — turn into a supposed claim that isn’t defensible, and can be dismissed as foolish? Well, you know the answer: centrists want to believe that liberals are just as bad as conservatives, so they see shrill partisanship even when it’s not really there.

It is, in short, a classic illustration of politically motivated reasoning.

Krugman’s blog, 8/22/14

August 23, 2014

There were two posts yesterday.  The first was “Core Success:”

In popular perception, the era since 2008 has been one of massive failure for economic analysis. The truth, as I’ve often tried to explain, is nearly the opposite — at least for those of us who didn’t forget Keynes, and took a more or less IS-LM-is model seriously. We’ve actually had a very good run, successfully predicting the quiescence of interest rates despite huge budget dheficits, the quiescence of inflation despite huge increases in the monetary base, and the adverse effects of harsh austerity policies.

A new post by Cecchetti and Schoenholtz on core inflation reminds me that this concept, too, has been a huge success.

Actually, I don’t think C&S get the argument for using some kind of core measure quite right, although their actual data analysis is fine. They simply assume that there is a problem of distinguishing between the signal and the noise, that for some reason there is an underlying trend that is imperfectly measured by the headline inflation rate. I prefer to think of it in terms of an underlying economic model, in which many but not all prices are temporarily sticky; as I explained some time ago, this implies that there is at any point in time a sort of “embedded” rate of inflation, and this — rather than short-term fluctuations — is what we’re trying to measure.

In any case, those of us who looked at core inflation came in for a lot of abuse during the “debasing the dollar” period of 2010-2011, when right-wingers were writing to Ben Bernanke to attack his policies and Paul Ryan was warning that rising commodity prices were the harbinger of runaway inflation. Assertions that fundamental inflation hadn’t gone up were met with ridicule and insults.

But sure enough, the commodity price effect on inflation was a blip, and went away. And the inflation hawks learned their lesson, and revised their models. Hahahaha — just kidding.

The second post yesterday was “Friday Not Music: Cats of the Great War:”

Not feeling inspired today — maybe because I’m focused on tonight’s concert. So how about cats instead — it turns out that a lot of them actually did serve in World War I.

Great!  Moar kittehs, please, Prof.

Krugman’s blog, 8/21/14

August 22, 2014

There were two posts yesterday.  The first was “Hawks Crying Wolf:”

Binyamin Appelbaum:

An increasingly vocal minority of Federal Reserve officials want the central bank to retreat more quickly from its stimulus campaign, arguing that the bank has largely exhausted its ability to improve economic conditions.

Is this really true? Of course, they are being very vocal — but when didn’t they call for monetary tightening?

The article highlights Charles Plosser of the Philadephia Fed; if you’ve been following these things, you know that Plosser has been warning about imminent inflation since the beginning of the crisis. He did it in 2008; he did it in 2009; he did it in 2010; he did it in 2011; I’m getting tired here, but you can easily find him doing the same in 2012 and 2013. And he has of course been wrong all the way — but he’s doing it again. This is news?

The real story here is the remarkable resilience of inflation panic: people who worry about inflation never seem daunted in the least by the repeated failure of their predictions. It’s an interesting question why.

Yesterday’s second post was “The Euro Catastrophe:”

Matt O’Brien points out that Europe really is doing worse than it did in the Great Depression. Meanwhile, Francois Hollande — whose spinelessness and willingness to buy into austerity doomed his presidency and quite possibly the European project — is finally, tentatively, suggesting that maybe further austerity isn’t the answer.

Simon Wren-Lewis thinks that the European embrace of austerity was a historical contingency; basically, the Greek crisis strengthened the hand of the austerians at a critical moment. I don’t think it’s that easy to explain; my sense was that there was powerful anti-Keynesian sentiment in Europe even before the Greek crisis, that macroeconomics as Anglo-Saxon economists understand it never had a real constituency in Europe’s corridors of power.

Whatever the explanation, we are now, as O’Brien says, looking at one of the great catastrophes of economic history.

Krugman’s blog, 8/20/14

August 21, 2014

There were two posts yesterday.  The first was “Inequality Delusions:”

Via the FT, a new study compares perceptions of inequality across advanced nations. The big takeaway here is that Americans are more likely than Europeans to believe that they live in a middle-class society, even though income is really much less equally distributed here than in Europe. I’ve truncated the table to show the comparison between the U.S. and France: the French think they live in a hierarchical pyramid when they are in reality mostly middle-class, Americans are the opposite.

As the paper says, other evidence also says that Americans vastly underestimate inequality in their own society – and when asked to choose an ideal wealth distribution, say that they like Sweden.

Why the difference? American exceptionalism when it comes to income distribution – our unique suspicion of and hostility to social insurance and anti-poverty programs – is, I and many others would argue, very much tied to our racial history. This does not, however, explain in any direct way why we should misperceive real inequality: people could oppose aid to Those People while understanding how rich the rich are. There may, however, be an indirect effect, because the racial divide empowers right-wing groups of all kinds, which in turn issue a lot of propaganda dismissing and minimizing inequality.

Interesting stuff.

Yesterday’s second post was “Ancient Atlases:”

Several commenters on my Roman Empire post mentioned the Colin McEvedy historical atlas of the ancient world. Indeed, a great favorite of mine. And it fed right into my Asimov-psychohistory obsession with its declaration, early on, that

History being a branch of the biological sciences its ultimate expression must be mathematical.

One thing, though: there’s a clarity and sweep to the ancient history atlas that isn’t matched by the later atlases — and I suspect that ignorance is the main reason. That is, we tend to impose more order and simplicity on the distant past, not because it was actually any less messy and complicated than later eras, but because we don’t have all the details and fill in with bold colors and straight lines. As I’ve noted in the past, this is why goldbugs and others who believe that they have access to truths ignored by modern economists tend to draw on supposed events in the distant past, where they can project what they think should have happened onto a mostly blank slate.

So I love my ancient history, but I do think it’s important to realize that the world has always been characterized by buzzing complexity in which causes and effects can be hard to disentangle. Same as it ever was.

Krugman’s blog, 8/19/14

August 20, 2014

There were two posts yesterday.  The first was “Beyond the Lies:”

Greg Sargent notes that the midterm election, which was supposed to be a referendum on Obamacare, isn’t looking at all like that in practice; Republican ads denouncing health reform have been dwindling month by month.

The reason is fairly obvious, although it’s not considered nice to state it bluntly: the attack on Obamacare depended almost entirely on lies, and those lies are becoming unsustainable now that the law is actually working. No, there aren’t any death panels; no, huge numbers of Americans aren’t losing coverage or finding their health costs soaring; no, jobs aren’t being killed in vast numbers. A few relatively affluent, healthy people are paying more for coverage; a few high-income taxpayers are paying more in taxes; a much larger number of Americans are getting coverage that was previously unavailable and/or unaffordable; and most people are seeing no difference at all, except that they no longer have to fear what happens if they lose their current coverage.

In other words, reform is working more or less the way it was supposed to (except for the Medicaid expansion in non-cooperating states).

Many of us argued all along that the right’s chance to kill reform would vanish once the program was actually in place; the horror stories only worked as long as the truth wasn’t visible. And that’s what seems to be happening.

Yesterday’s second post was “Veni Vidi Wiki:”

Vox has a great explanation of the Roman Empire in 40 maps (not all of them maps, really, but close enough); I love this sort of stuff.

A small niggle: nobody now thinks that quinqueremes had five banks of oars, which would be unwieldy to say the least; even rowing a trireme is really hard. Probably there were only one or two banks, with multiple rowers per oar.

Anyway, great stuff; I really liked map 2, which gave me a much better appreciation for how big the empire was. While I’m at it, let me put in a plug for Peter Temin’s lovely book on the Roman economy. Much more fun than thinking about European stagnation.


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