Paul Krugman

Paul Krugman @paulkrugman

Many social scientists are science fiction fans. Next week we're having an online discussion between two great authors and three nerdy professors (including yours truly) about world-building and more https://t.co/bgxuBlIE56 — PolitiTweet.org

Paul Krugman @paulkrugman

Don't count on anything. But the landscape could look very different a year from now https://t.co/H4TKCXH5Se — PolitiTweet.org

Paul Krugman @paulkrugman

Not a panacea for Democrats' problems. But many indications that the economy is gaining steam https://t.co/tfx3Xquiem — PolitiTweet.org

Paul Krugman @paulkrugman

Multiple reasons Dems are having a hard time right now. But they'd surely be doing better if Joe Manchin hadn't spent months futzing around and denying them the ability to claim that things were getting done. — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: Why do people with more money than anyone can use insist on keeping it all? Read the latest from @PaulKrugman. https://t.co… — PolitiTweet.org

Paul Krugman @paulkrugman

Also, their claimed shortfall would be <0.2 percent of GDP over the next decade. It's just trivial. — PolitiTweet.org

Paul Krugman @paulkrugman

RT @TristanSnell: BREAKING - After threats that 10,000 NYPD officers could quit the force over the NYC vaccine mandate, the actual number g… — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: "The fact that shortages and inflation are happening around the world is actually an indication that national policies aren… — PolitiTweet.org

Paul Krugman @paulkrugman

RT @nytopinion: @paulkrugman writes that Republicans are on a "swift journey from common sense and respect for science to destructive parti… — PolitiTweet.org

Paul Krugman @paulkrugman

So the pay-fors are there to satisfy a political need, not to solve an economic problem. If they deliver as much revenue as promised, good; but if they don't, they'll still have done their job by making desperately needed spending politically possible 4/ — PolitiTweet.org

Paul Krugman @paulkrugman

The main reason Dems want a deficit-neutral bill — whereas Rs have no qualms about unfunded tax cuts — is that Joe Manchin seems to think deficits are important. But they aren't, in a world of negative real interest rates 3/ — PolitiTweet.org

Paul Krugman @paulkrugman

Assuming Dems get past this, one remaining question is whether the pay-fors will actually work — whether tax hikes and improved enforcement will actually cover the cost of new spending. But the key point here is that *it doesn't matter* 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

What's actually happening on Democratic plans? I have no idea. We still seem to have a standoff between corporate Dems who won't say unambiguously that they'll vote for Build Back Better and progressives who won't vote for infrastructure without that assurance 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Reader service: Here's my intro to the Folio Society edition of the Foundation Trilogy, rescued via the Wayback Machine https://t.co/9oq0VvOse3 — PolitiTweet.org

Paul Krugman @paulkrugman

As far as I can see, this looks much more like the Korean War inflation than the 70s. And while that inflation lasted well over a year, it didn't persist 4/ https://t.co/ZT0DAb4Sga — PolitiTweet.org

Paul Krugman @paulkrugman

That's what's happening at the Port of LA 3/ https://t.co/8AgslgYzCL — PolitiTweet.org

Paul Krugman @paulkrugman

We talk a lot about supply-chain disruptions, but mostly what we have is supply chains delivering more than ever, but unable to keep up with demand 2/ — PolitiTweet.org

Paul Krugman @paulkrugman

As Joe says: we aren't having stagflation, we're having a (temporarily?) inflationary boom 1/ — PolitiTweet.org

Paul Krugman @paulkrugman

Yay! https://t.co/d7j7WVwqph — PolitiTweet.org

Paul Krugman @paulkrugman

Again, I went through all this in 1998 (and James Tobin could have told you most of it decades earlier) 15/ https://t.co/ZEILV7tmbT — PolitiTweet.org

Paul Krugman @paulkrugman

So in a zero-rate environment, velocity and similar concepts just don't help you understand what's happening. If anything, they create confusion by suggesting that the size of the monetary base matters under conditions where it doesn't 14/ — PolitiTweet.org

Paul Krugman @paulkrugman

Again, in an arithmetic sense the money multiplier has declined, but that's not a helpful way to describe what's going on, which is instead that the gears have simply been disengaged 13/ — PolitiTweet.org

Paul Krugman @paulkrugman

So M1 and M2 are no longer policy variables, even potentially; they're determined mainly by demand for deposits, and the Fed can't change that through its operations. As I said, money is endogenous 12/ — PolitiTweet.org

Paul Krugman @paulkrugman

Also, people who talk about the money supply usually mean an aggregate like M1 or M2. Normally the Fed can target those aggregates via its control of M0. But in a liquidity trap those gears are *also* disconnected. Increase bank reserves and they just sit there 11/ — PolitiTweet.org

Paul Krugman @paulkrugman

OK, two complications. The Fed engaged in unconventional open market operations, buying longer-term bonds etc — QE. These may have had some effect. But if so, it wasn't through anything like the normal relationship btwn money supply and GDP 10/ — PolitiTweet.org

Paul Krugman @paulkrugman

Think of two gears that normally mesh with each other, but are currently separated. If we spin gear A faster and nothing happens to gear B, would it make sense to say that the gearing ratio has declined? No, they're just spinning independently 9/ — PolitiTweet.org

Paul Krugman @paulkrugman

And when M0 doesn't affect GDP, a rise in M0 will, as a matter of arithmetic, reduce the ratio of GDP to M0 — velocity. But it makes no sense to focus on that ratio 8/ — PolitiTweet.org

Paul Krugman @paulkrugman

That's why we call it a liquidity trap. Normal monetary policy becomes irrelevant. Huge increases in M0 had basically no effect on GDP. I'll get into slight complications in a second, but that's the key insight 7/ — PolitiTweet.org

Paul Krugman @paulkrugman

And that in turn meant that at the margin M0 and Treasuries were perfect substitutes — two assets with the same (zero) rate of return. Conventional open-market operations therefore did nothing — investors were already saturated with liquidity, increasing M0 added nothing 6/ — PolitiTweet.org

Paul Krugman @paulkrugman

So increasing M0 increases liquidity, which sort of rolls through the economy via lower interest rates. But from late 2008 on the interest rate on short-term Treasuries was essentially zero, which meant that holding monetary base was costless 5/ — PolitiTweet.org