Paul Krugman
4,588,016 followers
We can talk about possible future recession, and about how underlying inflation may be higher than headline. But that's speculation rather than reporting, and arguable at the very least. Hard to argue against the proposition that media have missed the pretty good reality 2/
So, if your picture of the economy came entirely from headlines and cable chyrons — which is probably true for many — would you know that the economy has grown 6.7 percent under Biden so far and inflation for the past 6 months was 1.9 percent? 1/
Notably, Republicans rate current economic conditions as worse than in June 1980, when unemployment was 7.6 percent and inflation 14 percent 2/
Obviously a rhetorical question. A plurality of voters believes we're in a recession; they got that notion from somewhere 1/ twitter.com/JohnJHarwood/s…
Oh my. A wonderful scholar. His classic "The dynamo and the computer," about how it takes time for businesses to learn what to do with technology, shaped decades of economic analysis twitter.com/timobres/statu…
Obviously Germany can't have AFVs named Rommel or von Manstein. But in a way continuing the WW2 tradition of Panzers and Tigers is a bit like that. They could honor virtues, like the UK Challenger. Or cultural traditions. I'd be terrified to face an armored Currywurst
Totally irrelevant question: Why are German tanks named after cats, while US tanks are named after generals? Also, given lamentable US history of naming military bases after Confederate traitors, how did we end up fighting WW2 with tanks named after William Tecumseh Sherman?
All that said, very happy to see this kind of work being done. Traditional core inflation has performed badly lately, and we need to be exploring new approaches 9/
I say this even though I want to believe that inflation has rolled over. It's clearly way down, but a mechanical approach throws out data that might give reason for caution, say on wages 8/
E.g., a smoothing approach interprets any sustained downturn as permanent — so it ends up saying that the Great Depression was over by 1935. I actually worry Eeckhout's approach may be doing a milder version of this now, over-interpreting favorable recent inflation shocks 7/
A parallel that immediately occurred to me is estimating potential GDP. It can seem appealing to use a statistical smoothing procedure like Hedrick-Prescott, which sometimes produces plausible results. But we also know that it can go badly wrong at times 6/
On the other hand, the filter also throws out information. The dynamics of, say, official food and shelter price indexes are different in known ways; applying a common smoothing approach to the overall index means ignoring what we know about sectors 5/
What does Eeckhout's procedure add? It doesn't throw out data before past 3 months. Maybe more important, "artisanal" inflation measures can tempt analysts into choosing measures that tell them what they want to hear. So there's something to be said for a hands-free filter 4/
In fact, most practical analysts are using a variety of methods to try and extract the inflation signal from the noise, typically looking at 3-month changes in an index that excludes volatile stuff like energy and stuff with known long lags, mainly shelter 3/
First off, I basically agree with Eeckhout's conclusion: underlying inflation has fallen fast, although not quite ready to say that it's 2 percent. Also agree with the general point about the need to smooth but not too much: monthly is too noisy, annual too far behind reality 2/
I've been a bit behind on commenting on this widely cited recent analysis, but thought I might still have something to contribute. Warning: very wonkish, not for normal humans 1/ twitter.com/jan_eeckhout/s…
Well, it looks as if the Riders of Rohan will be coming to save Gondor after all. (PS: I'm not actually a LOTR fan) spiegel.de/politik/deutsc…
PS: My broadly similar take from a few months ago nytimes.com/2022/10/04/opi…
During my year in the government, my inbox was full of documents labeled SECRET NOFORN NOCONTRACT PROPIN ORCON. At least 95 percent contained nothing that hadn't already been reported in the Washington Post. twitter.com/daveweigel/sta…
Related: getting a lot of pushback on the latest column from people saying debt will be a huge problem bc of much higher interest rates. But no good reason to believe that will happen nytimes.com/2023/01/23/opi…
Olivier and I are on the same page. Once inflation is tamed — which seems to be happening surprisingly fast — we'll be back in an era of low rates and excess savings piie.com/blogs/realtime…
Now, some in the media are visibly trying to bring back the Very Serious People environment — kind of the way some on the political side are trying to bring back "but her emails". But I don't think it will work. And if it doesn't, GOP debt blackmail will be much weakened 6/
Oh, and the "government spending creates inflation" trope kind of missed its moment, with the 2021-22 inflation surge looking, um, transitory 5/
More subtly, long-term debt projections have come way down; still not rosy, but far less alarming than they were circa 2011. More about this soon. And the whole deficit-scold movement, while it still exists, has receded into the background 4/
But a dozen years have passed since Bowles and Simpson predicted a fiscal crisis within 2 years absent drastic action; it didn't happen, and despite recent Fed-driven increases interest rates are about the same now as they were when B-S were making their dire predictions 3/
Back in 2011, there was a bizarre elite consensus that we were in a fiscal crisis; as Ezra Klein pointed out at the time, this consensus was so strong that the media dropped the conventions of reportorial objectivity and openly sided with the deficit scolds 2/
According to Jeff Stein, the Biden admin strategy on the debt ceiling is to stare Rs down: make no concessions and dare them to provoke a crisis. I hope it works; if it does, one main reason will be the near-extinction of the Very Serious People 1/ washingtonpost.com/us-policy/2023…
We'll get more data in the weeks ahead, but at this point the burden of proof lies on anyone claiming that we had more than a, well, transitory inflation spike that's mostly behind us 6/
Recent wage growth running about the same as late 90s and just before 2007-9 recession. Doesn't exactly scream "wage-price spiral"! 5/
What about wages? Running hotter than eve of the pandemic. But here's a longer view, using nonsupervisory wages (longer time series) 4/
But anyway, the truth is striking. Here's 3-month "supercore" excluding food energy shelter and used cars: 3/
Several reasons for this. Too many media reports focus on yoy inflation, so miss the big turn. Traditional core inflation still reflecting rent increases from a year ago. And asymmetric reporting: breathless coverage of rising inflation, disinflation not so much 2/
One thing I've been noticing in my correspondence is how many people think inflation is still running wild; the big deceleration in the 2nd half of 2022 hasn't broken through to public consciousness 1/
In which Jamie Dimon of all people gives me the opportunity for some bad jokes along with the analysis nytimes.com/2023/01/20/opi…
Making the debt ceiling story as simple as I can. But it's difficult to get people to understand something when their political posturing depends on not understanding it nytimes.com/2023/01/19/opi…
I was curious to see how the fire-and-brimstone inflation crowd would react to improving data. To my surprise and slight disappointment, many of them seem to be admitting that a soft landing is possible 3/
Prices moderating everywhere; wage growth still elevated but moderating in 5 districts. Goes along with BLS, Atlanta Fed, Indeed etc. 2/
I haven't seen a lot of attention to the latest Beige Book, but it does seem to confirm other narratives, especially about moderating inflation 1/ federalreserve.gov/monetarypolicy…
Fwiw, core PPI telling the same story as almost every other indicator: inflation rolled over in the 2nd half of 2022
More work to be done -- but so much progress on the economy under @POTUS
Don't believe me? Ask Nobel prize winning economist, @paulkrugman
nytimes.com/2023/01/16/opi…
Retweeted by Paul Krugman "transitory" was always a bad word because it implies something measurable in months, when the real question was "is inflation entrenched so as to require a recession to bring it under control". Looking pretty likely now that the answer was "it's not". Which in turn...
Retweeted by Paul Krugman Obviously we've had problems, and would do things differently with the benefit of hindsight. But does this outcome really look like a catastrophe? 8/
Maybe new data will make the picture look worse in a few months. But right now it looks as if we achieved rapid recovery at the cost of maybe 20 months of elevated inflation. 7/
Meanwhile, we seem to have avoided the "scarring" many feared, with the labor market recovering to pre-crisis levels far faster than it did after the financial crisis 6/
And here's average hourly earnings, skipping the period when pandemic compositional effects caused huge distortions 5/
Here's "supercore" inflation — ex food, energy, shelter (which we know is very lagged) and used cars 4/
But now inflation seems to be coming down as fast as it went up. The new Team Transitory warns that this improvement won't last — but it's getting harder to make that case 3/
The opening salvo was the American Rescue Plan, which came in for immense criticism as "the most irresponsible fiscal policy in 50 years". Soaring inflation seemed to vindicate the critics 2/
We're coming up on the 2nd anniversary of Biden's inauguration, and I have a few (not very original) thoughts about his economic policy 1/
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