Thread by @LHSummers

.@JosephEStiglitz is a brilliant micro theorist. Unfortunately, his attempts at practical macroeconomics commit all the errors of wishful thinking that have brought the United States to this point.

A Balanced Response to Inflation rooseveltinstitute.org/2022/02/09/a-b…

In June, he called inflation a red herring and said that if it wasn’t, the Fed could act decisively to stop it. Now with 7 percent inflation he opposes substantial increases in interest rates.

He says inflation is volatile and has come down by half since October. Actually, monthly CPI inflation has been at annualized rates above 7 percent for all of the last 4 months.

He blames inflation on particular bottlenecks but pays no attention to trimmed mean and median inflation measures or core measures favored by serious analysts, all of which show substantial inflation acceleration.

He claims inflation expectations are well anchored-- ignoring the market for 1 and 2 years-- inflation swaps which have been on fire, and data from the NY Fed and University of Michigan showing pronounced increases in inflation expectations.

Wage inflation is now running above 5 percent quite pervasively and accelerating even as labor markets tighten. How does this square with a return to 2 percent inflation?

What conceivable basis does Joe have for blaming high oil prices on greedy oil companies? Have they really gotten greedier and so raised prices in the last months?

.@paulkrugman, who has been much more inflation serene than I, recognizes the need for strong monetary policy. There is plenty of room for debate about just what this means. But inflation denialism of the Stiglitz variety is a prescription for stagflation followed by recession.

I trust that all of those nominated by Pres Biden to the Fed will know better than to take the Stiglitz perspective in formulating monetary policy.