One thing I should have made clearer in the last newsletter is that there's a large chance that annual and, say, quarterly inflation will be telling very different stories by late this year 1/…
Suppose, for example, that core inflation Dec/Dec is 4+% while 4thQ average is 2.5% — which could happen simply because cost of shelter, which is 1/3 of the CPI and is more or less the average rent actually paid, spends most of the year catching up to new-residence rents 2/
In that case you could have headlines shrieking "eek! inflation" while the right read should be that the Fed has successfully engineered a soft landing. 3/
Obviously if even the three-month inflation rate is still running hot, which might happen, this won't be an issue. But the point is that the data will need a lot of interpreting (and there will be endless arguments about the interpretation) 4/
Another Kindleberger quote about the balance of payments (from memory): "People always want a number, but you can't just give a number, you have to tell a story." 5/

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More from @paulkrugman

7 Jan
But I didn't miss this point — it was actually the main motivator for the analysis, just too hard to lay out explicitly in a general-public column 2/
The thought process that led me to this column began with my recalling James Tobin's underappreciated 1972 analysis of the role of nonlinearity in producing inflationary bias 3/
Read 5 tweets
5 Jan
Like many numbers types, I tend to obsessively follow the Covid data. One big story, which will probably get more coverage soon, is FL's rapid rise in the dismal rankings 1/
These are 7-day averages, which are a lagging indicator during a surge; also, FL does only about half as much testing as NY. So the outbreak in FL is probably already worse than NY's 2/…
The political relevance is obvious. Just a month or so ago, FL officials were boasting about their low case rate (never mind all those deaths earlier in 2021). Just days ago they were sneering at how NY, with all those restrictions, was leading the nation in cases 3/
Read 8 tweets
2 Jan
Obviously this is a subjective take (which is fine!) but there are multiple reasons now to believe that reports of NYC's death were greatly exaggerated — and that's part of a larger story 1/…
Until Covid came along we were looking at a clear — and in some ways troubling — bifurcation of US economic geography. A knowledge economy "wanted" to concentrate in large, highly educated metros, leaving much of the heartland stranded 2/
Then came the virus, and for a little while people thought "density=death", and hence that the trend would reverse — although even then such movement as took place was largely to suburbs and exurbs of the big metros 3/
Read 9 tweets
1 Jan
Do you share my sense of dread about the year ahead? If not, why not? 1/
At this point I'm not personally all that afraid of Covid. I do know vaxxed/boosted people who've had breakthrough cases, but both anecdotes and the available data say that these cases are usually mild. For those acting responsibly, we're down to normal-risks-of-life levels 2/
Longer term I'm terrified of climate change. But at this point that fear has been overtaken by the near-term risk of political catastrophe right here in America 3/
Read 7 tweets
30 Dec 21
Price controls VERY occasionally have their uses — during wartime when rationing is rampant and perceived fairness/lack of profiteering are important 2/
There's also a *possible* argument for temporary controls to break a wage-price spiral that is persisting despite a weak economy — although making that work is so hard that it would be a strategy of last resort 3/
But we don't have a weak economy; we have inflation because we have a booming economy, with supply chains having trouble keeping up with the boom in goods consumption. And there's no hint of a wage-price spiral 4/
Read 4 tweets
30 Dec 21
Covid time is a flat circle, especially in FL. Remember when the first Covid wave started in the NY area, and right-wingers demanded that we apologize to Ron DeSantis — just as infections and deaths soared across the Sunbelt? 1/
Then that episode went down the memory hole and it was back to anti-mask and social distancing being great — until the Delta wave wreaked havoc across the red states, FL in particular 2/
And then that wave subsided, and until a few days ago DeSantis's people were boasting about their low case rate as Omicron hit the Northeast first. Sure enough 3/
Read 8 tweets

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