Still catching up on articles from last weekend. Here's a selection of Krugman's best...
In Memories Of Scare Tactics Past he reminds us that a year ago the right was warning about inflation. How did that work out? "The past year has, in effect, been a fairly clean test of these two views. And what has happened has been very much what people like me said would happen: in the face of persistent high unemployment, inflation has fallen despite all that money creation, and interest rates have stayed low despite those budget deficits. If you bet on inflation and rising rates — which, by the way, Eric Cantor, the Republican House whip, did — you lost a lot of money."
In Inflation Delusions he cites Alan Meltzer as an example.
In Arguments From Authority he shreds a David Brooks column attacking demand siders. "Funny, I thought we had a perfectly good explanation: severe downturn in demand from the financial crisis, and a stimulus which we warned from the beginning wasn’t nearly big enough. And as I’ve been trying to point out, events have strongly confirmed a demand-side view of the world."
"And you just have to wonder how it’s possible to have lived through the last ten years and still imagine that because a lot of Serious People believe something, you should believe it too. Iraq? Housing bubble? Inflation?"
And as a demand sider, he has to explain Why Isn’t Investment Higher? and follows up with More On Low Business Investment.
And he outlines how Self-defeating Austerity is. "In short, there’s a very good case to be made that austerity now isn’t just a bad idea because of its impact on the economy and the unemployed; it may well fail even at the task of helping the budget balance. It’s important to realize that I’m not saying that government spending always pays for itself, and that saving money is always counterproductive. These kinds of effects are specific to a liquidity trap situation. But that’s the situation we’re in."
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