Paul Krugman

All Photos 14 hours ago
What? Punishing the unemployed doesn't create jobs? Next you'll tell me that cutting taxes for the rich doesn't create growth.…
It also reduces the likely short-run multiplier on the American Rescue Plan, which included a lot of state and local aid; governments that aren't cash-strapped won't spend that money fast, hence less risk of overheating 3/
This presumably means that S&L austerity won't be the drag it was after the Great Recession 2/
The pandemic slump was very different from the Great Recession in many ways. One is that state and local revenue has held up very well 1/
A bizarre and troubling event: Andreu Mas-Colell, an eminent economist, may face huge fines for his alleged role in Catalonia's referendum on independence. A who's who of international economists has written in his defense…
The already weak case for worrying about stagflation just got a lot weaker…
Yes. Also, the surprisingly good condition of state and local finances means a slower effect of ARP aid, which isn't playing the expected role of averting drastic immediate cuts…
For example, the distinction between volatile and non-volatile prices:
And it has arrived! Now I can do light statistical work in style
Indeed. Health spending was supposed to soar bc of aging population, expansion of coverage, and historical tendency to grow faster than GDP. Actual rise in spending relatively modest…
I never expected the supply-chain issues to be more than transitory, or the Fed to be irresponsible. But if you were worried about either possibility, this past week should have reassured you. Runaway inflation isn't coming 7/
But last week's FOMC statement plus the "dot plot", while not extremely hawkish, suggested an institution aware that inflation might become a risk and willing to act if necessary 6/…
The other inflation story was that the economy would overheat as a result of big fiscal stimulus, and that the Fed — dead set on maximizing employment — would ignore the warning signs and let inflation get embedded. 5/
Excellent CEA post explaining why supply-chain problems look temporary 4/…
Timberrrrrr! (Spot lumber prices) 3/
Story #1 said that the Fed's intellectual framework — which makes a key distinction between volatile commodity prices and inertial "core" inflation — was all wrong, and that things like soaring lumber prices were harbingers, not transitory shocks 2/
So, while I was away the case for inflation panic died. Or actually the cases, plural. For these past few months there have been two inflation stories, both crucially requiring a key failure on the part of the Fed. Now we know both stories are wrong 1/
Not saying that Friedman was a bad economist: he was, in fact, a great innovator. But hard now to see him as being remotely in the same league as, to take a nonrandom example, Keynes 7/
By the way, Tobin was skeptical of the natural rate too — oh, and foreshadowed the collapse of the concept of the money supply as a well-defined measure. Funny how Tobin, not Friedman, appears to have won the long-run argument 6/…
The crown jewel of Friedman's work, the natural rate hypothesis, has also fallen on hard times, though not to the same extent. It may be true that trying to keep unemployment low eventually leads to accelerating inflation. But not much evidence these past 25 years 5/
This doesn't mean that the Fed is powerless: its control of the monetary base lets it move short-term interest rates, and both Romerromer-type studies and Sims-type VARs show that this matters. But M2 doesn't add much if anything 4/
James Tobin was right in 1970: to the extent that there was a correlation between monetary aggregates and GDP (there hasn't been much of one in recent decades), Friedman had the causation reversed 4/…
Monetarism — the claim that monetary aggregates like M1 or M2 drive the economy, and that stabilizing them is all policy needs to do — is dead, and should never have had the influence it did. 3/
Carter talks about the declining influence of Friedman's economic doctrines, but maybe I can add a little, having done some of this myself and also having watched macro evolve over 40 years 2/…
Zach Carter has a characteristically fascinating article on Milton Friedman and his fading legacy. Somehow I never appreciated how Friedman started from right-wing politics, and built a reputation as a technical economist to serve that cause 1/…
So let's talk about the Fed, which ... actually, that can wait until tomorrow 3/
Here's the tour, from Discovery Bicycle Tours — lovely people who provide a lot of support. No winery stay on my version, just a lot of hard but gratifying cycling. Well, and some wine and beer 2/…
And I'm home, after 6 days cycling the Finger Lakes 1/
Always good to see smart people admit having been wrong, and analyzing why. Also good, though far less important, when they say that I was right…
Not to say that overheating is a non-concern. But why buy into doctrines that have failed again and again? Anyway, back to it: miles to go (around 40) before I sleep 4/
And huge emphasis on monetary aggregates, which have been totally useless at predicting inflation (Milton Friedman got this repeatedly wrong in the 1980s) 3/
Intense hatred for the very idea of transitory inflation, which has been one of macro's greatest empirical triumphs, helping avoid repeated overreactions 2/
Slow start today on bike trip, which has been a bit harder than my priors and very hard on my posterior — but I'm doing OK. Anyway, quick check on my inbox, which is full of inflation panic. Funny thing: most correspondents obsessed with one or both of 2 failed doctrines 1/
Hi folks. I'm off on my first postpandemic bike trip this week. No columns or newsletters. I might tweet occasionally after a hard day's ride. Or I might just have a beer.
But markets do tell us about the views of people literally putting their money where their mouths are. And today's inflation hawks would be more credible if they had made some accounting of why they were so wrong back then. 5
Now, markets aren't always right — that 2009 rise was basically a bet on a V-shaped recovery, which didn't happen. And economists who say markets are wrong — like those of us predicting a long slog back then — are sometimes right 4/
But it prompted pieces like this classic in the WSJ 3/
There was in fact a rise in rates during early 2009 — driven by expectations of recovery that proved premature 2/
This is especially remarkable if you remember 2009, when every uptick in rates was seen as proof that markets feared inflation/debt crisis. Not stated as opinion — reported as fact 1/…
Dumb nationalism is out, but uncritical globalism isn't back in, writes
Retweeted by Paul Krugman
I am confident that if bond yields were going up, we'd see all kinds of stories about how this proves that an era of high inflation and rising rates is just around the corner. But somehow when the markets don't do what the hawks want them to, they lose all predictive power.
Retweeted by Paul Krugman
There will be no bipartisan infrastructure deal; the GOP just doesn't build stuff…
Really hope Jason is right. If he isn’t we’re withdrawing aid too fast…
But that means a long slog to make up the still huge job gap 10/
Possible interpretation: *all* of the stories we're telling, including childcare, fear, you can take this job and shove it, and UI, may be marginal; there's just a natural speed limit 9/
But if we look at the vaccination recovery, it's kind of in line with the norm, 500-600K a month job gains 8/
Of course, you'll notice that I'm truncating pre-pandemic, when crazy things happened 7/
Change in employment-pop ratio also seems to have a ceiling 6/
My version: nonfarm employment growth seems to have a max ~5%, which would be ~600K/month 5/
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