Paul Krugman has a post talking about how tighter monetary policy caused Sweden to go into deflation. Here is the chart showing their deflation. OK… we can see the deflation there far to the right. Paul Krugman talked about Sweden raising the interest rate to battle bubbles. Let’s look at the interest rate in Sweden. […]
I just watched the debate between Mark Thoma and Steve Williamson. (youtube video) As I see it, the main issue was the direction of causality in the Fisher equation. In the end, I agree with Mr. Williamson. The basic Fisher equation is… Real rate = nominal rate – expected inflation As the real rate is […]
As unemployment declines and the labor market tightens up, many expect wages to rise. Then as wages rise, inflation has a chance to perk up again. But I want to show a graph that I will be watching in order to determine if inflation will truly respond to rising labor income. The national income is […]
It is happening as I feared. Hilary Russ writes… Private money, public projects: More U.S. states doing deals. The movement has started for private funds to own public infrastructure. This is the entrenchment of inequality, which will be very hard to reverse. So why do I fear private ownership of public infrastructure? From what I […]
At the current INET conference, there was a forum presented for new ideas for teaching economics. One person who spoke was Oscar Landerretche. (begins speaking at 10:40 in video) He is the director of the School of Economics at the University of Chile in Santiago, Chile. I want to talk about his idea of […]
100 year old Taoist master. Photo taken in 1930’s. I have written recently about how a recession could open the door to progressive policies to reduce inequality. Of course it is crazy to call for a recession. Yet the message is one of healing. So to understand this message… let’s explore a healing principle […]
Yesterday I wrote that causing a recession to correct policy mistakes would reflect the medical wisdom of re-breaking a bone in order to set it correctly. Yes, there is pain in re-breaking a bone. Yes, the patient screams. But the patient is better off in the long-run. I said people would think I was […]
A talk given by Christina Romer was very good. (Posted by Mark Thoma) She said many practical things about economic downturns. She loved to refer back to the Great Depression. The basic message was not to fear downturns, and to be careful of doing anything to prolong them. Economies will recover normally and fairly quickly […]
The search for a model to explain Secular Stagnation is happening behind the scenes at the moment. Larry Summers is presenting Secular Stagnation as an Inverse of Say’s Law… “Lack of demand over time creates lack of supply”. But getting the mathematical mechanisms of how lack of demand suppresses supply (output) seems to be missing. […]
By way of Mark Thoma, there is a new video of Larry Summers talking about Inverse Say’s Law. It is a wonderful video and one that could wake up the economics profession about Effective Demand. His views will not only challenge Fresh Water economists, but also Salt Water economists. (His talk starts at 9-minute mark.) […]