Paul Krugman: Fatal Distraction


 Fatal Distraction, by Paul Krugman, in NY Times: Zero job growth, with unemployment still at nosebleed levels. Meanwhile, the interest rate on 10-year US bonds is down to 2.04%, and it’s negative on inflation-protected securities.

Aren’t you glad we pivoted from jobs to deficits a year and a half ago?

Meanwhile, on the other side of the pond, Is austerity killing Europe’s recovery?

After more than a year of aggressive budget cutting by European governments, an economic slowdown on the continent is confronting policymakers from Madrid to Frankfurt with an uncomfortable question: Have they been addressing the wrong problem?

Yah think?

Too bad there weren’t any prominent economists warning that the obsession with short-term deficits was a terrible mistake, that austerity would undermine hopes of recovery. Oh, wait.

The awful thing is that those of us who warned about all this — based not on some unorthodox doctrine, but on basic textbook macroeconomics — weren’t so much argued down as just ignored. Somehow, those with actual power were convinced that fiscal austerity wasn’t just an option but the only option, and that anyone arguing with that — even people like me and Joe Stiglitz, who had a few easy-to-understand credentials — were just not part of the serious discussion.

I haven’t fully organized my thoughts on exactly why this happened. But whatever the reasons, we are now reaping the consequences of a disastrous distraction of policy makers, who have been fighting phantoms while the real problems festered.

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