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> I prefer my economic takes from economists, or people who actually study these things. Hmm > you’re better off reading Krugman It used to be kind of a meme

by alecco 2y ago

> I prefer my economic takes from economists, or people who actually study these things. Hmm > you’re better off reading Krugman It used to be kind of a meme to make fun on how wrong Krugman was but now it's kind of like beating a dead horse. https://foreignpolicy.com/2019/10/22/economists-globalization-trade-paul-krugman-china/ https://foreignpolicy.com/2019/10/22/economists-globalizatio... https://www.theguardian.com/commentisfree/2018/jan/10/paul-krugman-mistake-white-working-class-voters-republicans https://www.theguardian.com/commentisfree/2018/jan/10/paul-k... In particular, Krugman was the flag bearer of "countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt". (paraphrasing) This was incredibly wrong. It ended up in sky high debt and now interests on it are non-zero. And most of the added money ended up in the top 10% making inequality much, much worse.

mu53 2y ago
Also, his article on why the internet is going nowhere. Definitely missed a few things
- ryandamm 2y ago
  Krugman discussing the Internet might be like geohot discussing economics. Or are you referring to the fact that he said it didn’t show up as having caused growth in the underlying economic data? I think he was pointing out something quantitative at the time, and in recent years he speculated that the strong growth in US GDP was finally reflecting efficiency and productivity gains from IT and the Internet. (The US’s strong growth until very very recently was an outgrowth of strong and rare increases in worker productivity.)
AnthonyMouse 2y ago
And that sort of thing is predictably wrong. It's premised on the combination of low interest rates and a lack of inflation, even though low interest rates generally cause inflation. As soon as you get inflation, keeping interest rates low would make it worse, but raising them explodes the interest rate on the debt. And your other alternative to paying the high interest is to print the money to pay the debt, which also worsens inflation. So taking on that much debt is just a bomb that goes off as soon as inflation becomes non-trivial, and on top of that, is a thing that generally causes inflation. To understand how people like that succeed, realize that there is always a market for someone who will tell you what you want to hear.
- ryandamm 2y ago
  I think you’re confusing correlation for causation. I trust a Nobel Prize winner has thought through it more deeply and integrated the causes and effects more than most random internet commentators. I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021. What actually causes inflation is more a function of overall demand and supply in an economy. Interest rates have an indirect effect on that balance that can also have higher or lower leverage depending on a lot of other factors.
  - tdullien 2y ago
    This is an important point, and thanks for pointing that out in this discussion. The reason why raising interest rates breaks inflation is usually because it chokes off economic activity to a point where labor ceases to have bargaining ability to ask for higher wages, which then chokes demand, which then helps bring supply and demand back into equilibrium and breaks the inflationary spiral. It's a mechanism that is quite clear, but also rarely discussed in polite company, because "breaking the bargaining power of labor by intentionally choking economic activity to create enough unemployment" is, when spelled out, prone to creating pretty emotional reactions.
  - jrflowers 2y ago
    I don’t think you are going to convince people to start liking or agreeing with Paul Krugman with your posts. People criticize him because they have read his stuff. The dude has been a very public figure for a very long time. At some point “Actually he is good and strong and smart and he is my friend” posts start sounding more like a fandom argument than anything actually salient to a discussion about any particular economic subject.
  - AnthonyMouse 2y ago
    > I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021. Interest rates in 1995 were about average, not particularly low. The zero interest rate period really started at the end of 2008 in response to the housing crash, with a very specific goal: To counteract the deflationary effect of the housing crash. A major deleterious effect of that policy was to effectively re-inflate the housing bubble, which is now Causing Problems. But it was quite effective at doing the thing it does, which is increasing the rate of inflation relative to the alternative. When the rate of inflation would otherwise have had a minus sign in front of it, that can be what you intended to do, but that doesn't mean that's not what it does.
desumeku 2y ago
Krugman is also the guy who said that minting a $1 trillion dollar coin wouldn't be inflationary.
- ryandamm 2y ago
  That was in response to the artificial debt ceiling. The coin was to be “deposited” and used a justification for why there didn’t need to be a vote to lift the debt ceiling for funds Congress has already allocated. Conflating that with Keynesian principles is false. He didn’t propose that the trillion dollar coin would ever affect actual spending.
ryandamm 2y ago
You’re describing Modern Monetary Theory (MMT), or really the parody of it that was popular in discussions online. Krugman actually generally felt it went too far, and was not a proponent of it. There is some similarity to his making fun of people worried about “bond vigilantes,” iirc. But I don’t think your characterization of his positions is accurate.

by alecco 2y ago

mu53 2y ago

Also, his article on why the internet is going nowhere. Definitely missed a few things

ryandamm 2y ago
Krugman discussing the Internet might be like geohot discussing economics. Or are you referring to the fact that he said it didn’t show up as having caused growth in the underlying economic data? I think he was pointing out something quantitative at the time, and in recent years he speculated that the strong growth in US GDP was finally reflecting efficiency and productivity gains from IT and the Internet. (The US’s strong growth until very very recently was an outgrowth of strong and rare increases in worker productivity.)

AnthonyMouse 2y ago

And that sort of thing is predictably wrong. It's premised on the combination of low interest rates and a lack of inflation, even though low interest rates generally cause inflation. As soon as you get inflation, keeping interest rates low would make it worse, but raising them explodes the interest rate on the debt. And your other alternative to paying the high interest is to print the money to pay the debt, which also worsens inflation. So taking on that much debt is just a bomb that goes off as soon as inflation becomes non-trivial, and on top of that, is a thing that generally causes inflation. To understand how people like that succeed, realize that there is always a market for someone who will tell you what you want to hear.

ryandamm 2y ago
I think you’re confusing correlation for causation. I trust a Nobel Prize winner has thought through it more deeply and integrated the causes and effects more than most random internet commentators. I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021. What actually causes inflation is more a function of overall demand and supply in an economy. Interest rates have an indirect effect on that balance that can also have higher or lower leverage depending on a lot of other factors.
- tdullien 2y ago
  This is an important point, and thanks for pointing that out in this discussion. The reason why raising interest rates breaks inflation is usually because it chokes off economic activity to a point where labor ceases to have bargaining ability to ask for higher wages, which then chokes demand, which then helps bring supply and demand back into equilibrium and breaks the inflationary spiral. It's a mechanism that is quite clear, but also rarely discussed in polite company, because "breaking the bargaining power of labor by intentionally choking economic activity to create enough unemployment" is, when spelled out, prone to creating pretty emotional reactions.
- jrflowers 2y ago
  I don’t think you are going to convince people to start liking or agreeing with Paul Krugman with your posts. People criticize him because they have read his stuff. The dude has been a very public figure for a very long time. At some point “Actually he is good and strong and smart and he is my friend” posts start sounding more like a fandom argument than anything actually salient to a discussion about any particular economic subject.
- AnthonyMouse 2y ago
  > I am happy to report that “low interest rates” do not cause inflation by themselves on any scale less than a decade. Source: 1995-2021. Interest rates in 1995 were about average, not particularly low. The zero interest rate period really started at the end of 2008 in response to the housing crash, with a very specific goal: To counteract the deflationary effect of the housing crash. A major deleterious effect of that policy was to effectively re-inflate the housing bubble, which is now Causing Problems. But it was quite effective at doing the thing it does, which is increasing the rate of inflation relative to the alternative. When the rate of inflation would otherwise have had a minus sign in front of it, that can be what you intended to do, but that doesn't mean that's not what it does.

desumeku 2y ago

Krugman is also the guy who said that minting a $1 trillion dollar coin wouldn't be inflationary.

ryandamm 2y ago
That was in response to the artificial debt ceiling. The coin was to be “deposited” and used a justification for why there didn’t need to be a vote to lift the debt ceiling for funds Congress has already allocated. Conflating that with Keynesian principles is false. He didn’t propose that the trillion dollar coin would ever affect actual spending.

ryandamm 2y ago

You’re describing Modern Monetary Theory (MMT), or really the parody of it that was popular in discussions online. Krugman actually generally felt it went too far, and was not a proponent of it. There is some similarity to his making fun of people worried about “bond vigilantes,” iirc. But I don’t think your characterization of his positions is accurate.