Krugman’s blog, 8/23/15

There was one post yesterday, “Nobody Could Have Predicted, Interest Rates Edition:”

The Wall Street Journal speaks
The Wall Street Journal Speaks

Sorry about sparsity of posts; on the road for family reasons, with real life getting in the way of digital. But I did see a number of people praising remarks from Charlie Munger declaring himself “flabbergasted” by low interest rates, with a sideswipe at anyone who claims to have had some inkling:

I think everybody’s been surprised by it, including all the people who are in the economics profession who kind of pretend they knew it all along. But I think practically everybody was flabbergasted. I was flabbergasted when they went low; when they went negative in Europe – I’m really flabbergasted.

Well, negative rates were a big shock; I had thought they were ruled out by the possibility of holding cash, and hadn’t thought the mechanics through. But this kind of “nobody saw it coming” remark is, if you ask me, a big dodge, an evasion of responsibility.

For sure, nobody saw negative rates coming, and few predicted that rates would stay this low this long. But there were different degrees of wrongness here. Read that WSJ piece, or anything just about everyone on the “Eek! Deficits!” side was saying, and compare it with, say, what I had to say. One reveals a world-view that has been utterly refuted by events; the other looks pretty good in the light of experience.

Pretending that everyone was equally flummoxed may make those who really were clueless feel better, but it’s not the truth.

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