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Sep 23 • 3 tweets • 1 min read
Nobody expects the Spanish Inquisition — or the zombie economic apocalypse. The Truss government believes in the miraculous power of tax cuts? Really? At this late date?
What's really amazing is that surging interest rates have been accompanied by a *plunge* in the pound. This is not supposed to happen in advanced countries: we expect deficit spending to drive up interest rates and make the currency *rise*, which is what happened under Reagan
But Britain is now trading like a developing country, where perceived fiscal irresponsibility is undermining confidence in the value of its currency. It's actually kind of awesome

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More from @paulkrugman

Paul Krugman Profile picture
Sep 24
Thinking more about reactions to the Truss/Kwarteng not-a-budget released Friday. While I yield to nobody in my disdain for their embrace of zombie economics, I'm puzzled by all the talk about a looming sterling crisis 1/
Just an aside: I can't be the only one who noticed the parallel between the declaration that a budget wasn't a budget, just a "fiscal event", and Putin's insistence that his war isn't a war, just a "special military operation". No moral equivalence, of course. But wow 2/
But back to sterling. I'm supposed to know something about currency crises — I did invent the academic field! And as far as I know there are two ways a country with a floating exchange rate can have a currency crisis, neither of which seems to apply to the UK 3/
Read 10 tweets
Paul Krugman Profile picture
Sep 17
Yep. The Great Resignation appears to have been temporary. 1/
I mean, does this look as if prime age adults have exited the work force en masse? 2/
Labor force participation down for >55 — but this is largely aging within this group. Being 69, or even 63, is different from being 56! 3/ bloomberg.com/opinion/articl…
Read 4 tweets
Paul Krugman Profile picture
Sep 16
As they say in the Patrick O'Brian novels, I give you joy of your victory! A few FRED-based thoughts on one of Brad's big insights: that the world didn't really break out of the Malthusian trap until 1870 1/
As it happens, my friend FRED includes the Bank of England dataset with estimates of some UK variables going back to the Middle Ages. And it allows me to make a few pictures of real wages versus population 2/
Up through 1600 the world was Malthusian pure and simple. Real wage in 2015 pounds versus population (inverted): just sliding up and down the curve with the rise and fall of plagues 3/
Read 11 tweets
Paul Krugman Profile picture
Sep 13
Well, I was getting ready to write about why we shouldn't make too much of the monthly CPI decline. Now need to write about not making too much of the monthly rise 1/
The core inflation number is the one that has people worried. But as I've been saying, that's basically shelter. And these days it's a really problematic indicator of what's happening to underlying inflation. 2/
CPI shelter prices are set to rise for quite a while simply because they reflect trends in newly rented housing with a lag. That's not a critique; there are reasons for doing it the way BLS does. But private indicators suggest that the rent surge is leveling off 3/
Read 4 tweets
Paul Krugman Profile picture
Sep 10
Next week I'll be participating in a discussion of inflation policy in the US and Europe. Have a fairly clear picture for the US, I think: economy overheated, but inflation expectations anchored, so we need some cooling but not a Volcker-style era of pain. What about Europe? 1/
My relatively benign view on the US is informed a lot by surveys, like the NY Fed survey; anxiously awaiting Monday release, but last release showed inflation expectations falling — down to 2.3% for 5 years 2/ newyorkfed.org/microeconomics…
The conventional wisdom has been that Europe is fundamentally in better shape — not overheated, so it was just transitory energy prices. But of course the energy price shock is now off the charts. And should we worry about expectations? 3/
Read 6 tweets
Paul Krugman Profile picture
Sep 8
So, I'm reading the Ball/Leigh/Mishra paper Jason Furman calls "the scariest economics paper of 2022." It definitely paints an ugly picture. And these are serious guys, not at all permahawks. Their grimness might well be right. But I have questions 1/ brookings.edu/wp-content/upl…
A lot of discussion out there about their use of vacancies to unemployment as a measure of labor market tightness. Indeed, the apparent outward shift in the Beveridge curve is the main driver of their pessimism. What do I think about that? No strong views 2/
Reasonable people on all sides here, and I don't feel that I understand post-Covid labor markets well enough to make a judgment. Put it this way: if we've had enough structural change to massively shift the B curve, we've also had enough to screw up standard measures. So, ??? 3/
Read 8 tweets

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