OK, we’ll bite. The Telegraph’s Jeremy Warner has a column with a headline which tends towards alarmist:
Negative interest rates put world on course for biggest mass default in history
The text actually says nothing of the sort. Jeremy notes the extent of widespread negative yields for sovereign debt in Europe, and rehearses how this came to be in terms of secular stagnation and a lack of demand. Where some might find fault is the final line:
Both Keynsian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.
Professor Krugman has a new post that tries to explain why nominal US sovereign interest rates are higher than nominal euro area bond yields. Much of the piece is useful, especially since he is right that credit risk has nothing to do with the differential between German and American borrowing costs.
Higher US rates are instead the result of differences in real rates and inflation expectations between the two countries. But we part ways with Krugman when he makes this argument in the context of expected changes in the exchange rate between euros and dollars: Read more
Kudos to Krugman for attempting to explain to Pimco’s Bill Gross that return on capital is not something that can be taken for granted.
His comments follow remarks from Gross that capitalism “needs carry” to survive. Read more
Paul Krugman says it himself: it’s the similarities between our time and other economic periods that often offer the best insight. But he’s currently in Paris thinking deep Parisienne style thoughts, which might explain the following…
There are, as he notes, some important distinctions to be made this time around, not least globalisation’s impact on the role of intangible rents.
Consequently, we may be living in an economy in which profits no longer remotely resemble a “natural” aspect of the economy. They are, one might say, somewhat synthetic. Read more
Carmen Reinhart and Ken Rogoff wrote a letter to Paul Krugman.
He responded, and so did some others. (DeLong for Krugman; Hamilton for R&R.)
On it goes.
And why not? Austerity is an important subject, the empirical data or lack of it deserves a great deal of attention. Economists calling each other names, probably less so. But it’s so entertaining… Read more
Krugman’s had a go, Cowen’s had a response and now Roche has weighed in.
So why are corporates hoarding cash, and is this good or bad for the economy? Read more
Forget about the $1 trillion coin debate.
The most exciting wonky discussion being had right now is between Steve Randy Waldman and Paul Krugman over whether “base money” and short-term debt are perfectly substitutable or not, and what that may or may not mean for central bank policy.
We confess that we have a bit of a vested interest here because for a long time we’ve been arguing much the same point as Waldman.
That’s not to say that Krugman is necessarily wrong; he may just be taking Waldman slightly too literally. Read more
You’ve heard what the early (and slim) analyst reaction has been, now for what the blogosphere has had to say about the fiscal deal achieved.
A good rundown comes courtesy of Pragmatic Capitalism’s Cullen Roche:
- A deal was actually finalized. That’s good news. It looked like we might actually go into January without a deal and that the odds of no deal at all were rising.
- No one really won here. Congress is totally dysfunctional.
- There’s still a lot unanswered.
It’s Christmas. A time of year intrinsically linked to baby Jesus, a manger, some ancient wise men, choirs of angels and what is mostly an unflattering representation of the Roman Empire.
Roman PR has been faltering on other fronts as well, as this segment demonstrates… Read more
It seems more top-tier economists are coming around to the idea that robots and technology could be having a greater influence on the economy (and this crisis in particular) than previously appreciated. Paul Krugman being the latest.
But first a quick backgrounder on the debate so far (as tracked by us). Read more
Christine Lagarde has urged countries to put a brake on austerity measures amid signs that the IMF is becoming increasingly concerned about the impact of government cutbacks on growth. Ms Lagarde, IMF managing director, cautioned against countries front-loading spending cuts and tax increases. “It’s sometimes better to have a bit more time,” she said at the annual meetings of the IMF and the World Bank on Thursday.
The fund warned earlier this week that governments around the world had systematically underestimated the damage done to growth by austerity. Read more
There’s a polite blogosphere debate going on between Paul Krugman and Steve Keen, an Australian economics professor who has some strong views about the role of debt and the financial sector, and about how conventional economics has overlooked or misunderstood them.
Keen, who is a beneficiary of George Soros’ Institute for New Economic Thinking, last week published a summary of a paper he’s going to present at an INET conference next week, which looks at why Hyman Minsky’s ideas are important and how they’ve been misunderstood/misappropriated. Read more
This graph is from this powerpoint — part of a presentation by Alan Krueger, chairman of Obama’s Council of Economic Advisers.
So it has been used to illustrate American inequality and its effect on inter-generational social mobility. H/T P Krugman. Read more
Alternative working title: When Orson Welles meets finance.
We discussed Fantasy Fed options on Wednesday. But here’s one from Paul Krugman, which we definitely overlooked — ironically, possibly the most fantastical of all. Read more
For the commute home, where your kids are tagging embarrassing pictures of you on Facebook,
- The Economist halts production for a month to let its readers catch up. (Or so says America’s finest news source.) Read more
As we conveyed earlier, the single fact which has critically changed the nature of the current European debt crisis is the spread of contagion into the Italian government bond market:
When does robust punditry cross over into downright rudeness?
Answer: when the New York Times’s Paul Krugman starts picking on some poor analyst from the International Energy Agency. Read more
Here’s an, erm, brave discussion paper out from the Boston Fed.
In it, authors Kristopher S. Gerardi, Christopher L. Foote, and Paul S. Willen examine “optimism” and “pessimism” about the US housing market before the recent crash. In other words, they’re looking at why some people missed the imminent house price implosion entirely and why some didn’t. Read more
Will Philip Mirowski be getting an invite to the next economist shindig? Perhaps not. The Carl Koch Professor of Economics and the History and Philosophy of Science at the University of Notre Dame has taken a flame-thrower to the post-crisis explanatory powers of his colleagues, in the latest edition of the Hedgehog Review. FT Alphaville has more. Read more
Day 475 in the Big Economist House.
10:19 am Read more
This will be music to the ears of Paul Krugman — Goldman Sachs calling for Quantitative Easing v2.0 and additional deficit-financed fiscal stimulus, reports FT Alphaville. The bank’s chief US economist Jan Hatzius reckons there are enough “disturbing signs” — Friday’s payroll report and recent CPI releases for example — to justify further policy easing via a return to unconventional monetary policy, and/or fiscal stimulus. Read more
Remember that time we said economists were fractious creatures? Forgive us, we misspoke. They’re *really* fractious creatures.
Exhibit A – Paul Krugman’s blog post of July 2 at 7:47am, and headlined: Read more
The inflation/deflation debate has recently morphed into a new form: The austerity/stimulus deadlock.
Some (Paul Krugman, ahem) believe rushing into austerity measures at this point could be a dangerous move. In fact, Krugman, for one, believes austerity measures risk sparking the very depression last year’s stimulus response tried hard to avoid. Read more
A new-ish letter (H/T Greg Mankiw) from a Fed economist opens with the below:
In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contibute [sic] any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public. Read more
Paul Krugman has been fighting something of a one-man war against European fiscal cuts lately — especially after the G20 bestowed its blessings.
He’s now directed his fire at euro-austerity’s impact on global growth: Read more
This is what happens when two “marquee columnists” fall out – a readers’ editor is called in to adjudicate.
I think the right thing to do is to simply acknowledge that, in trying to quickly summarize Krugman’s nuanced position, Sorkin over-simplified and got it wrong. Krugman did not call for the nationalization of the entire banking system, and, unless Sorkin can produce a citation to the contrary, he did not say it was necessary because otherwise the banks would fail again and cause a worldwide domino effect.
It’s become increasingly clear that economists are fractious creatures.
Recent spats include Niall Ferguson v Martin Wolf via Paul Krugman and the legendary dispute between Joseph Stiglitz and Kenneth Rogoff. Read more
More pain for Europe’s peripherals on Thursday morning:
Is it us, or is Paul Krugman — economist extraordinaire — becoming increasingly angry that no one is ‘getting’ his deflationista warnings about the economy?
Take the title of his latest blog missive: “It’s the stupidity economy“. Read more
Reuters columnist Rolfe Winkler points us to a recent speech and presentation by Fed governor James Bullard.
The speech, Winkler says, is a direct refutation of economist Paul Krugman‘s ideas that inflation, potentially triggered by extremely low interest rates and unconventional monetary policy, is not a threat so long as there’s a large amount of `slack’ in the US economy. Slack occurs when the output gap is a negative number — when the economy is below its full potential — and in traditional economic theory implies deflationary risks as companies cut prices and jobs to deal with the spare capacity. Read more