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Let's be clear. The German "non paper" proposal for the reform of EU fiscal rules, requiring in particular a decline of 0.5% in the debt to GDP (1% for high debt countries) ratio each year would be catastrophic. It would lead to the worst form of pro-cyclical fiscal policy.
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1. 「21世紀の財政政策」が出版されました。"Fiscal Policy under Low Interest Rates"の邦訳です。財政政策、財政赤字、債務に関心を持つすべての方にとって、本書が貴重な材料となることを願っています。
amazon.co.jp/21%E4%B8%96%E7…
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This is insane. twitter.com/chigrl/status/…
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1/8 This is a great discussion, so I shall continue. Second round answer to @IvanWerning. I like very much the Werning-Lorenzoni framework. dropbox.com/s/pbsurtd5onvn… One of its merits is indeed to show that thinking in terms of distributional conflict is totally mainstream.
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7/8. It is a highly inefficient way to deal with distributional conflicts. One can/should dream of a negotiation between workers, firms, and the state, in which the outcome is achieved without triggering inflation and requiring a painful slowdown.
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1/8. A point which is often lost in discussions of inflation and central bank policy. Inflation is fundamentally the outcome of the distributional conflict, between firms, workers, and taxpayers. It stops only when the various players are forced to accept the outcome.
7
The failure of covid zero. Likely to have major implications for China and the rest of the world.
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1/6 The risk of a false dawn in US inflation.
Headline inflation is likely to decrease sharply over the next few months. The reason is simple: Many of the large increases in commodity prices have started to reverse.
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1/6 The lag conundrum of monetary policy
Monetary policy affects activity with a lag. This enormously complicates the task of policy makers, and the design of disinflationary policy.
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A lot of similarities between crypto and QAnon. Same anti-state sentiment, same irrationality, same herd behavior. Good reasons to worry.
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Ben Bernanke is the living economist who has made the biggest contribution to world GDP. Without his actions when the financial crisis came, GDP would have collapsed much more than it did. So, on purely financial grounds, he deserves the prize (and on other grounds as well).
12
A nice example of salience: relation between inflation rate and google searches for ``inflation'' for the US, from 2004 to today. From Oleg Korenok, David Munro et Jiayi Chen (2022) ideas.repec.org/p/zbw/glodps/1…. Suggests things are ok up to close to 4%.
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A textbook example of how not to design and not to sell a fiscal expansion. While we were worried about Italy, the UK sneaked in. We are lucky that the UK is not in the euro… Otherwise, we would be facing another euro crisis. ☹
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1. A mild disagreement with @paukrugman on the measures to fight global warming in the IRA. It is all subsidies, no taxes. Maybe it was the best that could be achieved politically. But let’s not kid ourselves. It is a sure way to spend more than needed to achieve the desired goal
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1. I thought it useful to gather my thoughts and predictions for the US economy for the rest of the year. The usual caveat applies: there is a lot of uncertainty around them, but these are my best guesses. 1/9
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1. Looking for a research assistant, part time or full time, to help Jean Pisani Ferry (@pisaniferry) and me on research projects.
Location: Paris or DC.
Timing: Starting in the fall
Duration: At least a year.
Required skills:
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One thought about inflation fighting
1. When inflation comes from overheating, convincing workers that the economy needs to slow down, and that unemployment has to increase to control inflation, is hard but at least the logic can be explained.
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2. When inflation comes from an increase in commodity and energy prices, convincing workers that unemployment has to increase to control inflation, is even harder. “Why should I lose my job because Putin invaded Ukraine ?”
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Two reasons to expect Russia to drastically cut gas supplies.
1. Russia is a gas monopolist facing a very inelastic European demand curve. The only reason not to set a nearly infinite price (and sell epsilon) is to preserve future demand.
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This chart from @jburnmurdoch is truly worrisome. 2% of the population is already a very large number, and the graph suggests that it will increase further. This is macro significant.
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Don't blame the oil companies for their high profits. It is not price gouging, just how markets work. But there is nothing wrong with taxing those exceptional profits.
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2.Les dépenses budgétaires augmentent la demande, mais l’offre ne peut répondre que si l’économie n’est pas au plein emploi. Sinon elles créent de l’inflation.
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J'ai peur que les économistes de NUPES aient mal compris la signification de multiplicateurs supérieurs a 1. Comme ils ont tendance à me citer, je me sens oblige de corriger. Deux points tout simples (bien sûr, il y a beaucoup de complications potentielles que j’ignore ici):
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Why I am pessimistic about inflation, and why I believe the Fed will have to increase rates more than markets think. bit.ly/3q4nua8
Robert Solow Professor of economics emeritus, MIT
Fred Bergsten Senior Fellow, Peterson Institute for International Economics