Paul Krugman

Paul Krugman @paulkrugman

That's where the Fed and other central banks come in. When the financial system seizes up, they can step in — because they can print cash! — and prevent a self-reinforcing downward spiral. Often the promise that they will intervene if necessary ("whatever it takes") is enough 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

The answer is that the people/institutions who have the knowledge to buy also tend to already own a lot of the assets in question. When prices crash, they're left without cash or the collateral to borrow, so they can't play their usual stabilizing role 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

I generally think of these crises in terms of the framework Shleifer and Vishny offered in 1997, explaining how it's possible for some assets to become massively underpriced; why don't buyers rush in? 3/ https://t.co/i6LHPgbH9r — PolitiTweet.org

Paul Krugman @paulkrugman

The run arguably began with Mexico's tequila crisis in 1995; then there was the Asian crisis of 1997-8, the horrifying global crisis of 2008, the euro crisis of 2010-12, and a brief but very scary breakdown in March 2020 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

Putting the Republican attempt to hobble the Fed in perspective: important to realize that financial crises have been a defining feature of the world economy these past 25 years 1/ https://t.co/EFoTf0vXng — PolitiTweet.org

Paul Krugman @paulkrugman

Picture from Brookings illustrating the point 3/ https://t.co/unGLDYj86h — PolitiTweet.org

Paul Krugman @paulkrugman

The pandemic slump has hit low-wage workers hard, while the affluent have by and large been OK. So states with significant taxes on high incomes have suffered less revenue loss than places like Texas and Florida with no income tax 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

So, after all McConnell's railing against "blue state bailouts", red states by and large experiencing a bigger revenue hit than blue — bc red state tax systems are regressive, blue somewhat progressive 1/ https://t.co/hp0Vbtjuxe — PolitiTweet.org

Paul Krugman @paulkrugman

Now, few people are predicting a renewed financial crisis — but then, financial crises are almost by definition unpredictable, bc if people knew they were coming they would have happened already. Tying the Fed's hands is just a way to ensure that the worst might happen 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

But this time they're barely even trying to cover up their motives. Toomey is claiming that Fed facilities might be used to funnel aid to blue states, with no plausible theory of how that might happen 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

They also engaged in conspiracy theories, accusing the Fed of bailing out the Obama administration in the face of (nonexistent) fiscal crisis 4/ https://t.co/ZbghCZVHg4 — PolitiTweet.org

Paul Krugman @paulkrugman

Of course, this happened under Obama too: Rs attacked the Fed for trying to do its job. But back then they at least tried to offer a rationale, making (false) predictions of runaway inflation 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

It's true that financial markets are currently operating smoothly — precisely because the Fed stepped in back in March, when we came very close to a catastrophic financial meltdown 2/ https://t.co/A3lpSrlVTp — PolitiTweet.org

Paul Krugman @paulkrugman

I don't see any way to avoid seeing this last-minute R demand that the Fed be hobbled as economic sabotage — an attempt to increase the odds of a financial crisis on Biden's watch 1/ https://t.co/EFoTf0vXng — PolitiTweet.org

Paul Krugman @paulkrugman

The paper is titled "Deficit attention disorder". Basically, Rs consider deficits bad when and only when a D is in the WH — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: . @PaulKrugman responded to readers commenting on his column "Return of the Phony Deficit Hawks." Join the conversation: ht… — PolitiTweet.org

Paul Krugman @paulkrugman

So isn't there a good case for bending the budget rules to get through the pandemic slump with less austerity than might otherwise be required? Curious to see how experts would react 8/ — PolitiTweet.org

Paul Krugman @paulkrugman

There are rules to prevent this, but there are also ways to circumvent these rules, at least to some extent. Ideally states wouldn't have to do this, bc aid from DC would make it unnecessary. But that's not going to happen, at least unless Dems win big in GA 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

But here's the thing: this time around we know that the pandemic is a temporary shock, which means that state and local government *should* be borrowing to cover part of the temporary fiscal gap 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

In the national economy, new industries arise to take declining industries' place. At a state level, the adjustment to adversity may involve workers just moving somewhere else, hence permanent loss of revenue. So less leeway to borrow across a gap 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

State and local economies, however, are more likely to experience permanent adverse shocks, when, say, a principal industry like coal in WV or minicomputers in MA in the 1980s goes into long-term decline 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

My take is that the difference from the federal rules is ultimately driven by the difference in likely permanence of economic shocks. The nation as a whole can be expected to bounce back from a recession, which means that revenue will return 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

In general, discussions on this point emphasize the impact of the rules but don't say much about their justification 2/ https://t.co/zAux0YNnZI. — PolitiTweet.org

Paul Krugman @paulkrugman

The absence of state aid is a huge problem, because state and local governments, unlike the federal gov, are required to balance their budgets. But why? Important question 1/ https://t.co/VX2EDdHFVx — PolitiTweet.org

Paul Krugman @paulkrugman

RT @DeanBaker13: Paul Krugman is on the money on the economic rescue package, more money for the unemployed is more important than checks f… — PolitiTweet.org

Paul Krugman @paulkrugman

Again, no sympathy for the Brexiteers. But the EU is acting as if Britain were a small, debt-stressed country that can be bullied into submission. This is not going to work, and will lead to unnecessary chaos 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

I think Brexit is a bad idea — but it's going to happen. Given that, the EU's attitude is hugely destructive. Creating maximum disruption over fishing? Really? This will hurt everyone. 1/ https://t.co/gyCnju343U — PolitiTweet.org

Paul Krugman @paulkrugman

Restricting unemployment aid to 10 weeks is disastrous. We won't have a vaccine-led recovery until well into 2021; we won't have full recovery until well after that. Unbelievable https://t.co/rOTwyiX04s — PolitiTweet.org

Paul Krugman @paulkrugman

"In the long run we are all dead. Economists set themselves too easy, too useless a task if, in tempestuous seasons, they can only tell us that when the storm is long past the ocean is flat again." — PolitiTweet.org

Paul Krugman @paulkrugman

RT @hshierholz: An only 10-week extension of UI benefits would mean MILLIONS would exhaust benefits by the end of February, when the virus… — PolitiTweet.org