I think you are entirely misunderstanding what Krugman is saying. *The aim is to avoid a deflationary collapse, not to cut wages.* Let's say you have a typical

I think you are entirely misunderstanding what Krugman is saying. *The aim is to avoid a deflationary collapse, not to cut wages.* Let's say you have a typical economic cycle in an apple producing economy with real growth and a fixed currency. Since you have real growth, you're producing more and more apples with the same resources. This is great! Apples are cheap! Except you now have created a behavioral problem. Since the price of apples decreases with growth, a farmer needs to cut costs to remain profitable. In an ideal world, this would mean cutting wages. In a real growth scenario, the workers should be able to purchase more apples despite the wage cuts since the price drop in apples should exceed the wage cut. In the real world, this farmer would lose his head for cutting pay--wages are sticky. So instead of making the optimal choice (paying people less in nominal, but more in real terms), the farmer will fire people. This is BAD. Again, I'm going to keep pounding the table that the only reason inflation has gotten this out of hand is due to the *immense size of the stimulus.* The central bank raising interest rates would have only deferred that inflation into the future.