Procrustes Stretched
Dante's Manifesto
Inflating Your Way To Prosperity
One thing I often see in comments is people attributing to me, or to others, the notion that you can inflate your way to prosperity which is presented as self-evidently absurd.
Well, if you think that its self-evidently absurd, youve been listening to the wrong people.
Nobody thinks that an economy operating somewhere near full employment can inflate its way to higher output. But under depression conditions which is what we have now inflation is very much a positive thing.
Heres a quick example from Eichengreen and Sachs showing changes in the gold value of currencies 1929-35 versus changes in industrial production; the devaluation of currencies against gold was closely related to the changes in their overall price level:Slow Learners - NYTimes.comSlow Learners
The WSJ has an article today pointing out that the euro crisis isnt really about fiscal irresponsibility:
So if public debt is your yardstick, then the Spaniards were paragons of virtue. They borrowed lightly despite the fact that their euro-zone membership gave them an all-you-can-eat buffet of financing at bargain-basement rates.
As Europe scrambles to find a solution to a debt crisis thats threatening the world economy, its crucial to understand what actually happened in countries like Spain. Otherwise, policymakers will end up prescribing the wrong medicine, with disastrous results.
Thats all true, and Im glad to see it in the WSJ. But its presented as a startling insight, one that runs contrary to what everyone thinks. And thats amazing and depressing.
I mean, this was obvious from the very beginning. Heres what I wrote in February 2010:
The biggest trouble spot isnt Greece, its Spain which was running budget surpluses just a few years ago. True, Spain is running big deficits now but thats because of its economic collapse. And underlying that collapse is the real problem with the euro: one-size-fits-all monetary policy, which offers no relief to countries that suffer adverse shocks.
There are two things that are frustrating about the fiscalization of our discourse. First, its taking place even though many, probably most good economists have been arguing strenuously for a more sophisticated view. Second, many of the people insisting that deficits are the big issue probably dont even realize that theyre taking a questionable position its just part of what everyone thinks they know.
Against conventional wisdom, the gods themselves
Sometimes (actually, often) it feels like Im in one of those nightmares where youre shouting, but nobody can hear you. And you wouldnt really expect that to happen when youre doing your shouting from a pretty prominent platform.
Inflating Your Way To Prosperity - NYTimes.com
http://www.nytimes.com/2012/10/26/opinion/krugman-pointing-toward-prosperity.html?_r=0
Well, as Ive said before, Mr. Romneys plan is a sham. Its a list of things he claims will happen, with no description of the policies he would follow to make those things happen. We will cut the deficit and put America on track to a balanced budget, he declares, but he refuses to specify which tax loopholes he would close to offset his $5 trillion in tax cuts.
Actually, if describing what you want to see happen without providing any specific policies to get us there constitutes a plan, I can easily come up with a one-point plan that trumps Mr. Romney any day. Here it is: Every American will have a good job with good wages. Also, a blissfully happy marriage. And a pony.
So Mr. Romney is faking it. His real plan seems to be to foster economic recovery through magic, inspiring business confidence through his personal awesomeness. But what about the man he wants to kick out of the White House?
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in his own words....