Saturday, June 7, 2008
Krugman on the Economy
"Which decade is it, anyway? Not long ago it seemed as if everyone watching the carnage in financial markets was drawing scary parallels with the 1930s. ... You might think, then, that everyone would be congratulating Bernanke and company for their good work. But at an economic conference I recently attended, many of the participants--including people with a lot of influence in the policy world--seemed to be bashing the Bernanke Fed. ... The emerging conventional wisdom, if what I heard is any indication, is that Bernanke has been fighting the wrong enemy all along: inflation, not financial collapse, is the real threat. ... So this seems like a good time to declare that the new conventional wisdom is wrong. We are not watching a rerun of that '70's show--and the misguided belief that we are could do a lot of harm ... But as I said, this time there's no wage-price spiral in sight. ... But where are the unions demanding 11-percent-a-year wage increases? (Where are the unions, period?) Consumers are worried about inflation, but you have to search far and wide to find workers demanding compensation in the form of higher wages, let alone employers willing to accept those demands. In fact, wage growth actually seems to be slowing, thanks to the weakness of the job market. And since there isn't a wage-price spiral, we don't need higher interest rates to get inflation under control", Paul Krugman (PK) at the Houston Chronicle, 3 June 2008.
PK, are you serious? If you want to see your "wage-price" spiral, look at Asia, Vietnam, for example. I disagree with you, PK; we see a rerun of the 1970s, but this time, it will be worse for American workers as real wages in the US continue to fall to third world levels. You want to see unions, look to Asia; wage increases, look to Asia. PK, read a newspaper. As to increasing interest rates, why are commodity prices so high, if not in part due to low interest rates? See my 22 April 2008 post. PK, I think you understand what's going on, but are afraid to tell us.