Paul Krugman

@paulkrugman ↗

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Last Checked July 10, 2022

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Sun Jun 05 13:13:49 +0000 2022

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Paul Krugman @paulkrugman

Part of the answer is that broad deflation, as opposed to falling prices for goods subject to rapid technological progress, would require falling wages. And it's really, really hard to cut wages, even with high unemployment 6/ — PolitiTweet.org

Posted June 5, 2022

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Paul Krugman @paulkrugman

The other argument, which is kind of interesting, is that we'e accustomed to seeing many prices fall over time — e.g. electronics. And that doesn't seem to do any harm. So what would be wrong with overall deflation? 5/ — PolitiTweet.org

Posted June 5, 2022

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Paul Krugman @paulkrugman

The rest of the answer goes back to the Fisher effect: higher trend inflation means higher normal interest rates, which gives the Fed more room to cut rates during recessions. Observing that falling computer prices are harmless is irrelevant to that point 7/ — PolitiTweet.org

Posted June 5, 2022