Krugman on the attack

In the New York Times , rehashing ancient calumnies. It must hold upward a tedious day.

Dear Paul , permit me innovate you lot to parts of the distribution other than the mean. Inflation lead a opportunity is a tail event.  I am inwards California now. There is a danger of large earthquakes. That the large ane has non happened inwards the terminal five years does non hateful the footing volition hold upward nevertheless forever , nor that geologists are mendacious idiots ignorant of Bayes' theorem.

My worries well-nigh inflation produce non come upward from monetary policy. I've been every bit outspoken on the sentiment that monetary policy is ineffective at the cipher leap every bit the most enterprise Keynesian.  In the WSJ ,  "Reserves that pay marketplace rank involvement are non inflationary. Period." If you lot bothered to read anything earlier venting , you'd know that.

My worries stalk from the western populace at 100% debt to gross domestic product ratio , larger unfunded commitments to ageing populations , tedious increment , too no enterprise conception to pay it back. I've been pretty clear that this is a self inflicted injure -- our governments tin sack permit economies grow too pay it dorsum , but may select non to.  If bond investors create upward one's heed they don't desire to hold upward the ones belongings the handbag , inflation volition come upward no thing what cardinal banks produce well-nigh it.

This machinery remains a proper error sitting underneath us. But ane that tin sack sit down a long time. Just similar , I promise , the San Andreas.  But the fact that sovereign debt must eventually hold upward repaid , defaulted on , or inflated away , remains an accounting identity valid fifty-fifty inwards the most rabid Keynesian worldview.

For fun , I spent a few minutes googling Krugman too deflation (sometimes "spiral" , sometimes "vortex") , which also did non lead house , too inwards my sentiment cannot happen.  But I volition resist. It's only likewise slowly to play this game. Economics is non soothsaying , too descending farther into the pit dignifies it unneccessarily.