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It's notable that Krugman is now saying that there was "lots of room" to lower interest rates during the 2008 recession - he certainly didn't see it that way at

It's notable that Krugman is now saying that there was "lots of room" to lower interest rates during the 2008 recession - he certainly didn't see it that way at the time, and was very vocal about this view. Does this mean that he has finally changed his mind? Regardless, I don't think we'll be seeing anything like a recession this time around - the Fed has learned from their screwup in 2008 and won't make the same mistakes again. Edit: A slowdown in growth as a result of e.g. problems in Europe or China might happen, but this would not be a "recession" as commonly understood. It would look very different in the data (inflation, unemployment rates and the like) and the appropriate policy response would be completely different as well. Edit 2: And the Fed did a lot more than just "lowering interest rates" in a direct, trivial sense (and they _had_ to, since interest rates _were_ indeed quite low even before the Great Recession was widely acknowledged as such. I'm not sure why people - including Krugman - are now suggesting otherwise). I don't think many people would disagree that these policy measures were highly effective, but Krugman used to be a very vocal skeptic.

maxxxxx 8y ago
History doesn't repeat but it rhymes. They will not make the same mistakes again but different ones (not sure if I would even call it mistakes. In the end the Fed can't do much in a world of outrageous debt). Our whole economy is not set up to be stable. We push until things blow up, deal with the consequences, and then we start pushing again.
- stcredzero 8y ago
  History doesn't repeat but it rhymes. Just make sure the person in charge isn't out of touch and surrounded by people too sycophantic to call out mistakes. Also, don't use green screen improperly and re-use the same static shots. Also, save the lightsaber for key dramatic moments.
anilshanbhag 8y ago
The problem is Fed has learnt its lesson. However, China/ Japan/Europe have learnt nothing and are sitting on their own set of unique problems and these countries will be the likely cause of next recession.
elicash 8y ago
The U.S. did lower interest rates in response to the Great Recession. I don't think anybody, including Krugman, claims they didn't do so?
cromwellian 8y ago
You are reading it wrong. There was lots of room to lower rates in response to the 2008 crisis because the rates weren’t low before the recession. After they were lowered to almost the zero bound there was not much else to do. This one around, they are already low before the recession hits. The situation is not the same, hence the Fed has less wiggle room. And thanks to the tax cuts, and a deficit nearing $1 trillion in a boom economy, there will be less wiggle room for fiscal stimulus vs tax cuts or spending as well, because the deficit will skyrocket if government revenues fall in a recession. Krugman is being consistent and logical here.
- deleted 8y ago
  [deleted]
pessimizer 8y ago
No, he just thought that heavy money printing and spending would be more sustainable - because lowering interest rates would kick the can down the road, and you wouldn't be able to lower interest rates again. People who disagreed with him insisted that lowered interest rates would lead to investment, and that interest rates could gradually start rising again. He, along with others of his school, insisted that safety net payments and infrastructure investments - or even just paying people to dig holes and other people to fill them - would generate immediate massive consumer demand, and supply would follow. The option of giving money to people who don't have lobbyists was not chosen, and the option to give money to people who do was. Interest rates stayed low, companies sat on huge mountains of cash and just paid themselves more or invested in press releasable tech companies and other decorative unprofitable baubles, the markets rose into the stratosphere, and now there will be a reckoning.

maxxxxx 8y ago

History doesn't repeat but it rhymes. They will not make the same mistakes again but different ones (not sure if I would even call it mistakes. In the end the Fed can't do much in a world of outrageous debt). Our whole economy is not set up to be stable. We push until things blow up, deal with the consequences, and then we start pushing again.

stcredzero 8y ago
History doesn't repeat but it rhymes. Just make sure the person in charge isn't out of touch and surrounded by people too sycophantic to call out mistakes. Also, don't use green screen improperly and re-use the same static shots. Also, save the lightsaber for key dramatic moments.

anilshanbhag 8y ago

The problem is Fed has learnt its lesson. However, China/ Japan/Europe have learnt nothing and are sitting on their own set of unique problems and these countries will be the likely cause of next recession.

elicash 8y ago

The U.S. did lower interest rates in response to the Great Recession. I don't think anybody, including Krugman, claims they didn't do so?

cromwellian 8y ago

You are reading it wrong. There was lots of room to lower rates in response to the 2008 crisis because the rates weren’t low before the recession. After they were lowered to almost the zero bound there was not much else to do. This one around, they are already low before the recession hits. The situation is not the same, hence the Fed has less wiggle room. And thanks to the tax cuts, and a deficit nearing $1 trillion in a boom economy, there will be less wiggle room for fiscal stimulus vs tax cuts or spending as well, because the deficit will skyrocket if government revenues fall in a recession. Krugman is being consistent and logical here.

deleted 8y ago
[deleted]

pessimizer 8y ago

No, he just thought that heavy money printing and spending would be more sustainable - because lowering interest rates would kick the can down the road, and you wouldn't be able to lower interest rates again. People who disagreed with him insisted that lowered interest rates would lead to investment, and that interest rates could gradually start rising again. He, along with others of his school, insisted that safety net payments and infrastructure investments - or even just paying people to dig holes and other people to fill them - would generate immediate massive consumer demand, and supply would follow. The option of giving money to people who don't have lobbyists was not chosen, and the option to give money to people who do was. Interest rates stayed low, companies sat on huge mountains of cash and just paid themselves more or invested in press releasable tech companies and other decorative unprofitable baubles, the markets rose into the stratosphere, and now there will be a reckoning.