Paul Krugman

Paul Krugman @paulkrugman

From the limited information we're getting, it sure sounds as if that's Ukraine's strategy in Kherson, aided by interdiction of Russian supply lines. 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

Each attack cost the defenders more than the attackers, so the result was gradual attrition and thinning of German defenses to the point where they finally collapsed 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

What I'm reading about Kherson seems a bit reminiscent of the Hundred Days' Offensive in 1918. Instead of prolonged mass attacks that tried to break the German lines, the Allies launched a series of short sharp jabs, seeking surprise and probing for weak points 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Many people still seem to expect WW2-style battles: breakthroughs, deep penetrations and sweeping envelopments. But current weapons technology seems to favor the defense, and in many ways this war looks more like WW1 (plus HIMARS, a whole other story) 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

I'm part of the watching world. Zero expertise, although I've read a fair bit of military history. But for fellow watchers, maybe a hint about historical analogies 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Oh, and I have no idea what u*, if it exists, actually is; nor do I think Fed policy should be based on an estimate thereof. I'm for gradual rate hikes until there are clear signs of slowing underlying inflation. 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

As it is, however, I'm making the case that *even if* you believe the orthodoxy, we can have a fairly soft landing that doesn't impose massive suffering 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

Now maybe the whole expectations-augmented Phillips curve story is wrong, and we don't need *any* rise in unemployment to bring this inflation down. I'd love to see a clear model — and feasible policy ideas — for achieving that 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

Of course that interpretation could be all wrong. But I was pushing back against claims that we needed a 1980-85-type era of very high unemployment to cure current inflation. 2022 isn't 1980 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

That standard framework didn't come out of thin air. Data from the big rise and fall of inflation in the 70s and 80s sort of seemed to support it 3/ https://t.co/0y2wE5Uii8 — PolitiTweet.org

Paul Krugman @paulkrugman

My argument was that even if we use the standard framework, current data suggest the need to cool off the labor market, not to put it through a Volcker-style wringer 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

So some people don't seem to realize that this was a *dovish* thread. I was pushing back against assertions, most prominently by Larry Summers, that we need an extended slump to control inflation 1/ https://t.co/RprSKUfKbC — PolitiTweet.org

Paul Krugman @paulkrugman

Pretty soon advocates of rate hikes will have to argue that the good news is transitory — which, to be fair, much of it probably is. But we can enjoy the irony 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

And the prices index of the ISM manufacturing survey has fallen off a cliff 4/ https://t.co/sPq6xVIMx9 — PolitiTweet.org

Paul Krugman @paulkrugman

FAO just reported continuing fall in world food prices, which should show up in grocery stores with a lag 3/ https://t.co/IrzjGHcq92 — PolitiTweet.org

Paul Krugman @paulkrugman

You know about gasoline, although friends who actually watch Fox tell me some hosts are still talking about "record gas prices" 2/ https://t.co/zGprMf1wal — PolitiTweet.org

Paul Krugman @paulkrugman

Are people aware how many indicators are pointing to lower inflation in the near term? Not to declare victory: still little evidence of a fall in underlying inflation. But it's still amazing — and, of course, possibly relevant for November 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

It has been almost 22 years since I wrote this: "If a presidential candidate were to declare that the earth is flat, you would be sure to see a news analysis under the headline ''Shape of the Planet: Both Sides Have a Point.''" Still true. https://t.co/qVqQc5Ulzs — PolitiTweet.org

Paul Krugman @paulkrugman

Do they think the expectations data are meaningless? Do they have a different model of inflation? Inquiring minds want to know 11/ — PolitiTweet.org

Paul Krugman @paulkrugman

This could, of course, be wrong, and God knows we've learned to be wary of optimistic forecasts. But what seems odd to me is that the pessimists don't even seem to engage with this issue. They're just telling 80s-style stories and ignoring the direct evidence on expectations 10/ — PolitiTweet.org

Paul Krugman @paulkrugman

If those measures are right, getting inflation under control requires getting u up to u*, so f(u) is zero — so some pain — but that's the end of the story. No need for a period of above-normal unemployment 9/ — PolitiTweet.org

Paul Krugman @paulkrugman

But is this calculation relevant? Both market prices and surveys suggest that medium-term inflation expectations have remained "anchored" despite recent inflation 8/ https://t.co/Ilf2gNL7DB — PolitiTweet.org

Paul Krugman @paulkrugman

And if you apply estimates of the sacrifice ratio to the gap between core inflation and the Fed's 2 percent target, it's ugly: it says that we need a lot of excess unemployment in the years ahead 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

Given that picture, bringing inflation down would require a period of unemployment higher than u*. How much higher for how much longer? The "sacrifice ratio" was an estimate of how much excess unemployment would be needed to bring inflation down by one point 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

In that case u* became the NAIRU — the rate of unemployment at which inflation neither rose nor fell. The picture looked like this 5/ https://t.co/DiFKAlYyot — PolitiTweet.org

Paul Krugman @paulkrugman

In the 60s and 70s it seemed reasonable to assume that expected inflation was equal to recent past inflation — in fact, the previous year's inflation looked like a pretty good proxy. So the Phillips curve could be rearranged to Change in inflation = f(u) 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

There is some level of u — call it u* — for which f(u)=0. One way or another, u* (which can change over time!) is highly significant. But exactly how it's significant depends on what determines expectations 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Ever since Friedman and Phelps wrote their seminal papers on inflation and unemployment in the 60s, most practicing macroeconomists have worked with a model that looks something like this: Core inflation = f(u) + Expected inflation where u is the unemployment rate 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

OK, gonna do an econ thread most of my followers will find incomprehensible. But I think it needs to be done, bc there seems to be a dispute over the inflation outlook in which people are talking past each other 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Labeling hard to read. Here's the table https://t.co/8rAyA9ucd3 — PolitiTweet.org