Krugman’s blog, 8/23/16

There was one post yesterday, “The Folly of Prudence, IMF Edition:”

This, from Brad Setser, is infuriating. He notes that even now the IMF is advocating fiscal contraction almost everywhere — the euro area, Japan, China — and fiscal expansion almost nowhere.

Setser puts this in terms of the IMF violating its own dictum that current-account surplus countries should be expanding, which is true. But I’d put it in a broader context: we’re in a world where secular stagnation looks like a very real risk, where inflation is below-target everywhere despite unprecedented monetary expansion. Everything about recent experience suggests that the world desperately needs fiscal expansion to boost demand and expand the supply of safe assets, that our sole reliance on central banks isn’t working.

Even if the ultimate solution may involve higher inflation targets and the always-invoked structural reform, nothing is likely to work without a major helping push from fiscal policy. This diagnosis has, finally, been making some headway in the wider discourse; it’s not just what a few of us Keynesians have been saying. Yet the IMF, in the name of prudence, is still — still! — pushing for fiscal austerity.

We’ve been living with low-rate, depression economics for 8 years now — and key players are still acting as if they’ve learned nothing.

Advertisements

Tags:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: