Paul Krugman

Paul Krugman @paulkrugman

But don't people have direct experience of the job market? Derek Thompson makes a point I've made repeatedly: huge disconnect between people's perception of their own well-being and of the economy as a whole 3/ https://t.co/kDp172fYUS — PolitiTweet.org

Paul Krugman @paulkrugman

Michigan survey says they don't — that amid a jobs boom they've heard more negative than positive stories about *employment* 2/ https://t.co/z0hRvvIBAH — PolitiTweet.org

Paul Krugman @paulkrugman

People are asking why so much of the public says we're in a recession despite strong job growth. One answer is that when people say "recession" they mean high gas prices. But do people actually know about the job growth? 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Which brings me back to my main point: credibility issues (which may be important!) aside, there's no strong rationale for getting down to 2%. And if we were willing to accept 3%, recent data suggest we're almost there! 8/ — PolitiTweet.org

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

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

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

Paul Krugman @paulkrugman

True, there's around $2 trillion in cash out there, facing the full inflation tax. But 85% of that is $100 bills, which are probably for the most part held by people we'd *like* to make poorer 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

Yields on interest-bearing assets rise with inflation (Fisher effect), and in fact real yields were higher in the 4% Reagan years than the 2% more recent period (yes, there are other reasons, but still) 3/ https://t.co/6ggmrmp26p — PolitiTweet.org

Paul Krugman @paulkrugman

Anyway, I thought two points were worth responding to. The first was that at 4 percent inflation, the value of a dollar halves in 18 years. Which is true. But would a higher inflation target penalize savers? Only if they held their wealth in cash under the mattress 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

After my newsletter pointed out that the current rate of underlying inflation was considered acceptable during the Reagan years I got, um, mail — nothing riles people up like monetary economics 1/ https://t.co/vGyXxwnXBt — PolitiTweet.org

Paul Krugman @paulkrugman

Always thought Navarro's economic analysis was criminally bad, but not at this level — PolitiTweet.org

Paul Krugman @paulkrugman

So definitely no sign of wage-price spiral or anything like that; and maybe some indication that the economy isn't as overheated as even I thought. Agree that the Fed needs to gradually hike rates; but it's almost looking as if quite a lot of inflation was ... transitory 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Three-month rates of change in core and trimmed-mean PCE 2/: https://t.co/5eTwNEUH92 — PolitiTweet.org

Paul Krugman @paulkrugman

Worth noting that measures of underlying inflation have also been drifting downward 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Indeed. Sanctions are constraining Russian imports, to great effect; export curbs largely irrelevant — PolitiTweet.org

Paul Krugman @paulkrugman

Since mid-December, US 10-years ~1.45=>2.9. German 10-years ~-.35=>1.2. So around 150 basis points in both. ECB has been slower to raise policy rates, but markets apparently expect similar overall tightening in the end 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

Was just on a panel in Berlin discussing monetary policy. When comparing Fed and ECB, important to note that de facto tightening, as measured by the rise in long-term rates, has been about the same! 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

US gas prices on same dates were $2.22 and $4.59 respectively, a $2.39 rise. Given noisy data, basically identical 2/ https://t.co/C4SeYwUl2y — PolitiTweet.org

Paul Krugman @paulkrugman

Using Twitter to post a calculation, for possible hyperlinking. German gasoline prices 12/21/20: 1.28 euros per liter, euro = $1.22, 3.785 l/gal. So $5.91/gal (taxes!). By 5/23/22, 2.15, 1.07, so $8.71, a $2.80 rise 1/ https://t.co/LNbTyHUFRb — PolitiTweet.org

Paul Krugman @paulkrugman

And euro area unemployment actually below pre-pandemic. Maybe more like us that we think? 2/ https://t.co/pXofOFOJGP — PolitiTweet.org

Paul Krugman @paulkrugman

Maybe — but not sure we understand Euro wage numbers that well. Notable that core inflation in euro area, as conventionally defined, was 3.8% over the past year, which would normally suggest some overheating. Not a criticism; just a statement of uncertainty. 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Did coffee write this? Anyway, sounds as if I’m in good shape https://t.co/LKigEvHLcS — PolitiTweet.org

Paul Krugman @paulkrugman

So actually the European story looks much more similar to the US than I thought. In both cases no reason to panic: no sign of inflation getting embedded, so what's needed is cooling-off, not a punishing recession. But it's really more or less the same story. 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

But European unemployment — which is structurally higher than US — is below pre pandemic. Core inflation was 1 percent in the last month. 3/ https://t.co/GVCYz8pO7O — PolitiTweet.org

Paul Krugman @paulkrugman

The narrative is that inflation in the US and the euro area are quite different. The US is overheated, with additional inflation from supply chain+Ukraine. Europe, the story goes, is all supply chain etc, bc it didn't have as much fiscal stimulus 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

I'm off giving various talks in Europe, and doing some homework. It seems to me that there's a widespread (among wonks) narrative here that doesn't actually look right, as suggested by this chart from Eurostat 1/ https://t.co/9GLsxxPkb6 — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: “To understand current inflation discourse, you need to be aware that there is a substantial group of economic commentators… — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: “The reliably awful Senator Ted Cruz attracted considerable attention by insisting that the answer is to put armed guards i… — PolitiTweet.org

Paul Krugman @paulkrugman

Inflation has probably peaked. Some people are already furious https://t.co/FwzG8RHFnc — PolitiTweet.org