Krugman et al

[Lark]

Reinhart And Rogoff Are Not Happy

Update: Brad DeLong makes my point with graphs.

Their letter is here.

This could go on forever, and both they and I have other things to do. So let me just state — clearly, I hope — where their analytical sin lies.

To some extent it lies in the downplaying of causality issues — of whether high debt causes slow growth, slow growth causes high debt, or both high debt and slow growth are the result of third factors (as was the case in demobilizing postwar America, which they highlighted in their original paper).

But the more important sin involves the misuse of the “90 percent” criterion.

There is, as everyone in this debate has acknowledged, a negative correlation in the data between debt and growth. As a result, draw a line at any point — 80 percent, 90 percent, whatever — and countries with debt above that level will tend to have slower growth than countries with debt below that level.

There is, however, an enormous difference between the statement “countries with debt over 90 percent of GDP tend to have slower growth than countries with debt below 90 percent of GDP” and the statement “growth drops off sharply when debt exceeds 90 percent of GDP”. The former statement is true; the latter isn’t. Yet R&R have repeatedly blurred that distinction, and have continued to do so in recent writings.

And for a country with debt in the vicinity of the 90 percent level — as, for example, in both the US and the UK — the distinction is crucial. It’s the difference between arguing that failure to impose an austerity program amounting to a few percent of GDP might reduce GDP a decade from now by a fraction of a percent at most — which is what the actual correlation suggests — to suggesting that it will reduce future GDP by 10 percent, which is what the threshold claim suggests.

Austerity-minded policy makers, of course, seized on the latter claim, citing R&R — and if the authors ever made an effort to correct this misconception, or indeed if they have ever even acknowledged that it’s a misconception, it was done very quietly.

I’m sorry, but the failure to clear up this misconception has done a great deal of harm — and this harm is not significantly mitigated by various remarks in passing to the effect that austerity might be overdone.

krugman

[Luisa Fernandes]

O economia Paul Krugman considera que Portugal vive um “pesadelo” económico-financeiro e questiona como ser possível ultrapassar problemas estruturais “condenando ao desemprego” milhares de trabalhadores.

“Não me digam que Portugal tem tido más políticas no passado e que tem profundos problemas estruturais. Claro que tem, e todos têm, mas sendo que em Portugal a situação é mais grave do que em outros países, como é que faz sentido que se consiga lidar com estes problemas condenando ao desemprego um grande número de trabalhadores disponíveis?”, frisa Paul Krugman num artigo publicado nesta segunda-feira no seu blog do New York Times, “Consciência de Um Liberal”.

O Nobel da economia de 2008 debruça-se sobre a situação portuguesa  partindo de um artigo publicado no jornal Financial Times. Para o economista, a resposta aos problemas de Portugal, “conhecidos há muitas décadas”, beneficiaria se a Europa avançasse no sentido de a política monetária e orçamental expansionista, ou seja, que aumentasse a circulação de dinheiro na economia.

O economista reconhece que, nesse campo, “Portugal não pode fazer as coisas por conta própria, porque já não tem moeda própria”. Mas contrapõe: “‘OK’ então: ou o euro deve acabar ou algo deve ser feito para fazê-lo funcionar, porque aquilo a que estamos a assistir (e os portugueses a experimentar) é inaceitável”, sublinha.

Krugman insiste, por isso, uma expansão “mais forte na zona do euro como um todo”, “uma inflação mais elevada no núcleo europeu”, tendo em mente que o Banco Central Europeu (BCE), assim como a Reserva Federal Americana, são contra taxas de juro próximas de zero.

“Pode e deve tentar-se aplicar políticas não convencionais, mas é preciso tanta ajuda quanto possível ao nível da política orçamental e não uma situação em que a austeridade na periferia é reforçada pela austeridade no núcleo”, frisou. Mas pelo contrário, reforçou, aquilo a que se tem assistido nos últimos três anos é a uma política europeia “focada quase que inteiramente nos supostos perigos da dívida pública”. “O importante agora é mudar as políticas que estão a criar esse pesadelo”, concluiu.

Memórias com Silva Lopes e Miguel Beleza
Num outro texto no seu blog, Krugman lembra como em 1975 o então governador do Banco de Portugal, José da Silva Lopes, que veio a ser ministro das Finanças, pediu aconselhamento especializado ao Massachusetts Institute of Technology (MIT). Depois de uma primeira visita de professores da conhecida faculdade norte-americana, Portugal contou no Verão de 1976 com a ajuda de cinco estudantes do MIT, entre eles Miguel Beleza, mais tarde Governador do Banco de Portugal e ministro das Finanças, assim como o próprio Krugman.

“A julgar pela reputação académica de que [estes responsáveis] viriam a gozar mais tarde, eles [portugueses] tiveram um grande grupo. Um ano depois chegariam David Germany, Jeremy Bulow, e, imaginem quem, Ken Rogoff”, conta Krugman, referindo-se a um dos dois autores do polémico estudo sobre o impacto da dívida pública no crescimento, citado por vários governantes na defesa da austeridade, mas posto em causa por três economistas norte-americanos que detectaram erros de cálculo no trabalho.

Público

[Zel]

so se esqueceram de dizer que o krugman ja disse que dadas as circunstancias nao ha nada que o nosso governo possa fazer aparte de sair do euro, portanto a velha manipulacao jornalistica para enganar totos desinformados

[Lark]

ó homem, lê lá melhor.
ele diz que portugal por si próprio nada pode fazer excepto sair do euro.
mas as autoridades europeias e o BCE podem.
estabelecendo um target de inflação nos países core, mais agressivo (na minha opinião teria que ser para cima de uns 4%, pelo menos).
a expansão liderada pelos países do núcleo mais o esforço de austeridade que já fizemos poderia dar uma velocidade de escape à economia europeia que nos tirasse da crise.
seria win win para todos na europa. o núcleo expandia-se (está também a contraír, como sabemos) podendo absorver mais exportações da periferia.

não tenho dúvidas que esse vai ser o caminho seguido, mais tarde ou mais cedo. esperemos que não seja tarde demais.
mas mesmo esse caminho não resolve os problemas da periferia, a longo prazo.
teremos que, num esforço concertado com o resto da europa, reescalonando a dívida e usando o ouro e a ajuda europeia, sair planeadamente e organizadamente do euro.

L

[Zel]

o problema eh q as pessoas usam o krugman para criticar o governo sem perceberem o que ele diz

[Incognitus]

Isto também é Krugman ...


In Praise of Cheap Labor
Bad jobs at bad wages are better than no jobs at all.
http://web.mit.edu/krugman/www/smokey.html

[vbm]

But with good jobs, well paid, people can finance children, women and old people at home, and send disguised urban unemployees to the countryside, to take care about their belongings and make some useful work in agriculture! This is  a development some of us seem reluctant to admit, but quite logical with the increase in productivity of expert good workers.

[Incognitus]

Não há bons empregos antes de existirem empregos.

[Lark]

Isto também é Krugman ...


In Praise of Cheap Labor
Bad jobs at bad wages are better than no jobs at all.
http://web.mit.edu/krugman/www/smokey.html

naquele tempo era atacado pela esquerda...

L

[Zel]

http://dilbert.com/strips/comic/2013-06-03/

[Zel]

onde esta o lark?

[Zenith]

Muito tempo que o Lark não aparece, nem como Iznogud

[Zel]

o lark percebeu que o krugman eh uma fraude e esta a atravessar um momento dificil 

[kitano]

O lark por vezes fica umas temporadas sem aparecer, mas espero que esteja tudo bem.

[vbm]

o lark percebeu que o krugman eh uma fraude e esta a atravessar um momento dificil 

LOL

[hermes]

o lark percebeu que o krugman eh uma fraude e esta a atravessar um momento dificil 

Acho que estás a assumir demasiado. Pau que nasce torto, tarde ou nunca se endireita.

[Incognitus]

Um tema antigo ...
  Leftists become incandescent when reminded of the socialist roots of Nazism
 
http://blogs.telegraph.co.uk/news/danielhannan/100260720/whenever-you-mention-fascisms-socialist-roots-left-wingers-become-incandescent-why/

[vbm]

Um tema antigo ... 
Leftists become incandescent when reminded of the socialist roots of Nazism

É um facto.
Mas a alternativa,
jamais será a de um puro
relativismo, disfarçado de tolerância.

[Lark]

Paul Krugman - New York Times Blog
 
The big headline on the front page of today’s FT — at least in the U.S. edition — goes to this report about the Bank for International Settlements. According to the article, the BIS is warning that “forward guidance” — the attempt to drive long-term interest rates down by promising to keep short-term rates low for a long time — “could endanger the international financial system.” So I thought, typical BIS — the gnomes of Basel have been consistently against anything that might restore full employment, have been into punishment all the way. And I got ready to write a BIS-bashing post.

But first I thought I should check the actual BIS report — and it’s not very much like the description in the FT. Yes, it mentions possible risks to financial stability, but it also talks about the reasons for forward guidance and the need for some kind of unconventional stimulus; if it seems somewhat down on the policy, it’s more about doubtful effectiveness than about looming doom. In other words, the fear factor here is more the FT projecting its own prejudices onto the BIS than the BIS itself.

And that, I think, is an indicator. The urge to hike rates — the rationale keeps changing, but the demand stays the same — is widespread in the financial press. Why? The ever-changing reasons for a never-changing policy suggest that we aren’t really talking about policy analysis. Instead we’re talking about some mix of class interest (rentiers want their rents) and desire to see economics as a morality play (easy money feels good, therefore it must be bad).

Anyway, quite amazing. And I worry that the incessant drumbeat of demands for rate hikes will eventually wear the central bankers down.

[Lark]

Paul Krugman - New York Times Blog

Canon to right of me, canon to left of me — actually, scratch that, it’s all canon to right of me.

Noah Smith writes about what he calls the “finance macro canon.” It’s mainly the view that money-printing and deficits lead inexorably to runaway inflation, plus assorted other arguments about why easy money is a terrible thing even in a depressed economy.

And Noah is right — it’s still a view that is dominant on much of Wall Street. I’ve had several recent conversations with finance-industry people — including traders — who talk with some wonderment about the failure of high inflation and a plunging dollar to materialize, because “all the experts” told them to expect that outcome. When I found myself on CNBC with Joe Kernan, he described me as a “unicorn” — he couldn’t believe that there was anyone out there who didn’t believe that deficits and QE were going to lead to rapid doom.

Now, it’s interesting to note that the really smart Wall Street money doesn’t buy into this canon. Jan Hatzius and the rest of the economics group at Goldman have an underlying macroeconomic framework pretty much indistinguishable from mine, and have consistently talked down the risks from easy money and deficits. But the great Armani-suited unwashed apparently don’t know that; they think that “everyone” shares their springtime-for-Weimar vision.

What makes this even more peculiar is the way the canon continues to dominate despite having failed the reality test in the most dramatic way possible. Here’s the budget deficit as a percent of GDP (red line) and the rate of growth of the monetary base (currency plus bank reserves; blue line) in recent years:


Both exploded to unprecedented levels — yet inflation went nowhere, and is in fact running below the Fed’s target.

So how can this disastrous a failure of the canon’s predictions have failed to make a debt in its dominance — especially when us unicorns were predicting exactly this result?

Actually, an aside on prediction failures: there are failures, and then there are failures. Some people seem to think that something like Spain’s slight recovery this year — the best estimates now are that it may grow 1.5 percent — are as big a failure for the critics of austerity as the kind of thing I show above is a failure of the finance canon. But lots of stuff can cause the economy to grow a percentage point or two more or less than your forecast. On the other hand, if you believe that prices should move in proportion to the monetary base, there’s simply no way to rationalize triple-digit money growth associated with 2 percent or less inflation.

Anyway, what lies behind the canon’s continuing hold?

Class interest arguably explains the policy demands: tight money is what rentiers always want. But most of the consumers of this bad analysis are trying to make money, not influence policy, so what’s in it for them?

Noah suggests that it’s the need for the illusion of knowledge; but this in itself doesn’t explain why goldbug cranks should dominate so completely. Why haven’t the kind of people who listened to Peter Hyperinflation-by-2010 Schiff switched to, say, Warren Mosler?

It has to be in some sense political; the canon appeals to certain kinds of prejudices, in particular the prejudices of angry old white men with money to invest. But it remains amazing how little those prejudices have been dented by their failure to meet the most decisive real-world test you could imagine.