Paul Krugman

Paul Krugman @paulkrugman

Politically it may play very badly — although high energy and food prices, which have nothing to do with policy, are hurting incumbents everywhere. But in economic terms, unless there's some hidden form of entrenchment, I don't see a big policy failure 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

If so — and we won't know for a while whether these expectations measures are good, but they're what we have — the end result of policy will have been pretty good. Rapid employment recovery, a nasty but brief inflation overshoot, but no extended slump 5/ — PolitiTweet.org

Paul Krugman @paulkrugman

And that appeared to be a real possibility. Fortunately, however, every measure we have says it didn't happen: markets and surveys both say that medium-term inflation expectations remain anchored. That is, it looks as if the Fed responded in time 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

The fear has always been that by responding too slowly to inflation, the Fed would allow it to become "entrenched" — that is, that wage and price setting would start to reflect expectations of sustained future inflation, requiring a Volcker-type regime of pain to undo 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

First, yes, the Fed — and a number of economists, me included — called inflation wrong over the past year and a half, which has a reputational cost. Fair enough. But when people talk about policy getting behind the curve, they mean more than being embarrassed 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

A quick thread on curves and what it means to get behind them, inspired by the latest Michigan inflation expectations print — which is one of multiple indicators that inflation expectations remain muted 1/ https://t.co/ZdJRMHEmMy — PolitiTweet.org

Paul Krugman @paulkrugman

Not just one number. 5-year breakeven at 2.54. NY Fed survey is also at 2.8% for 5 years; 3.6% at 3 years, down from 3.9 last month. Absolutely zero evidence of inflation getting entrenched — PolitiTweet.org

Paul Krugman @paulkrugman

Counterpoint 2/ https://t.co/nQajzedXof — PolitiTweet.org

Paul Krugman @paulkrugman

Point 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

@jasonfurman OK, stuff I didn’t know. Still weird — PolitiTweet.org

Paul Krugman @paulkrugman

As I wrote 3/ https://t.co/kbbG0bgWBi — PolitiTweet.org

Paul Krugman @paulkrugman

These days the numbers don't tell the tale; you need to interpret in the face of structural change, and it's hard 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

Atlanta Fed wage tracker came in well above average wage numbers — which I predicted last week 1/ https://t.co/aLRoAws5BE — PolitiTweet.org

Paul Krugman @paulkrugman

RT @GC_CUNY: Looking for some interesting books for your summer reading lists? Grad Center scholars share what they’re reading, including @… — PolitiTweet.org

Paul Krugman @paulkrugman

@jasonfurman I know they use swaps data. But this seems unreasonable. Either some weird stuff going on in swap market or some kind of data error. Even with falling commodity prices and June behind us, that size drop seems implausible — PolitiTweet.org

Paul Krugman @paulkrugman

Straw man? Not long ago markets thought bitcoin was worth 70K. I use market pricing as (a) one indication of whether inflation expectations getting entrenched (b) as a challenge: if ur view is very different, you should think about why — PolitiTweet.org

Paul Krugman @paulkrugman

I actually don't understand where that number comes from. Inflation protected bond coming due July 15 2023 yielding ~-.3; 1-year nominal rate ~3.2. So shouldn't year-ahead be around 3.5? — PolitiTweet.org

Paul Krugman @paulkrugman

Even worse than that. Different growth and employment numbers telling different stories. Wrote about this Tuesday https://t.co/kbbG0bgWBi — PolitiTweet.org

Paul Krugman @paulkrugman

Of course could be true. But cost of wrongly accepting high U as the norm would be huge 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

Also, weird echo of early 2010s when analysts responded to cyclical decline by reducing estimates of potential output. And funny how the story has shifted from”we need a period of 5% unemployment” to “5% is permanent” 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Indeed. If we’re way below the NAIRU shouldn’t wage growth be accelerating, not falling? 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Word. — PolitiTweet.org

Paul Krugman @paulkrugman

NOT saying it's all good. But a combination of statistical issues and the media's focus on year-on-year makes it look as if inflation is getting worse, when it's actually probably getting better 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

You can see this from private-sector measures 2/ https://t.co/rq2etvspi1 — PolitiTweet.org

Paul Krugman @paulkrugman

Actually, BLS rent measures have probably understated "true" housing inflation, bc they measure avg rent paid, not soaring rents on new leases. At this point, however, they're failing to reflect what looks like a big slowdown in rents 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

If it signals a more dovish turn if, as Josh and I both expect, underlying inflation looks better by the next FOMC meeting, not too much damage will have been done. Markets pricing in much slower inflation looking forward; if this starts to show in real data, we'll be OK 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

The good news is that I don't think this matters much. The long-term rates that matter for the real economy much more dependent on how high Fed funds eventually goes than on the precise path. The question really is how the Fed reacts if/when the numbers improve 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

Agree with this thread — today's hot inflation number is already out of date, not reflecting falling gasoline prices and other factors that have recently gone into reverse. But hard to imagine that the Fed won't hike by 75 anyway 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Obligatory self-promotion: I invented currency crises in 1979 — not the thing itself, but the academic literature. Business has been good ever since. Also, an excellent article. — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: “But what about all the mostly youngish, not especially rich people who bought crypto because Venmo was flacking it?” @Paul… — PolitiTweet.org