Comments for Krugman Is Wrong: The United States Could Not End Up Like Greece at http://www.cepr.net , comment 1 to 25 out of 20 comments http://www.cepr.net Tue, 21 May 2013 15:30:50 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7870 I am trying to get my head around this debate. I get the point about the fact that Sovereign Money controls its own destiny with respect to solvency. I am less sure about the 'risk' side of controlling its destiny by way of printing itself out of any troubles, which is the inflation question. I need a fuller explanation from the MMT crowd on their understanding of inflation, ie, its root cause, the risk/cause/definition of hyperinflation, and how do you guard against those risk? How do you gauge when you've reached a tipping point on that front? To my mind, there must be SOME point at which the federal government becomes effectively 'income constrained', ie, the hazards of inflation make the printing of money an unviable policy option. - Tom Cobb Tue, 29 Mar 2011 18:44:26 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7815 Like they say, I think this is the beginning of a beautiful friendship. Or not. - Intrinsic Value Sun, 27 Mar 2011 21:49:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7789 Krugman is saying that the alternative to Greece if debt is not brought under control in the long run is Zimbabwe or Germany in 1923 (possibly a better comparison). You are saying that being Germany in 1923 is better than being Greece. Maybe... - giulio Sat, 26 Mar 2011 21:39:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7788 "This could lead to a serious problem with inflation, but it would not put us in the Greek situation of having to go hat in hand before the bond vigilantes" Cna you explain why the latter is worse than the former? Looks like Krugman may finally be waking up. - Paul Andrews Sat, 26 Mar 2011 18:22:12 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7779 All this concern about what others will be willing to pay for our debt and whether printing money causes inflation, ignores three facts: 1. The federal government, being Monetarily Sovereign, does not need to borrow. Rather than "printing" T-securities it could "print" dollars. So-called "borrowing," (misnomer for federal T-security sales)became obsolete in 1971. So worry about what the market will pay for your T-bills, when you don't need to sell T-bills? 2. Since 1971, there has been zero relationship between federal deficit and inflation. So what has caused inflation? Oil prices. 3. There is no possibility of hyperinflation in the U.S. We really should ask the Cassandras to stop talking about hyperinflation. These sky-is-falling types have no idea what hyperinflation is, nor what causes it, nor how to prevent it. Every time I read about the federal deficit, I see some guy predicting we are headed for hyperinflation, and then inevitably, they mention Germany, as though in vague way, we are similar to what Germany was. It as though someone told you not to go on a cruise, because "you know what happened to the Titanic." Until you understand what actually causes hyperinflation (no, it's not deficit spending), stop predicting it. Rodger Malcolm Mitchell - Rodger Malcolm Mitchell Sat, 26 Mar 2011 09:34:11 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7776 I know you think hyperinflation and paying $1000/barrel for oil because of a currency collapse would be fantastic positives for the US economy, but some of us actually see them as bad things. That's the difference. You're right that the government can set its own interest rate if it doesn't care about inflation or what its currency can buy. That's not some amazing revelation that the rest of us don't "get". The difference is those of us that use that currency do care. I do care I'm getting a negative interest rate on my savings. I do care that my gas gets more expensive. I can agree to a point that the US can issue currency to use idle resource without causing inflation. Krugmen believes this too. But we all have different ideas of what an idle resource is and exactly what policies can properly utilize them. Your policy solution, that is doesn't matter and we can do whatever the hell we want, is just childish and asinine. - dave Sat, 26 Mar 2011 06:37:27 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7775 Sometimes the subtlety of Paul Krugman is over the head of literalists like Dean Baker. A remark such as, [i]"Could America cease to exist? Sure, if a humongous asteroid were to land in the middle of Kansas,"[/i] would almost certainly draw criticism from him that the writer was claiming that America is in danger of ceasing to exist. - Bill H Sat, 26 Mar 2011 06:29:09 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7774 Yes, we cannot become a banana republic. We have no bananas. We do have paper which we can print with $s, 1s, and 0s. So, we can be a "paper" tiger. - V Ray Sat, 26 Mar 2011 06:11:01 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7773 The alternative to Greece that is proposed is Argentina. Yes, it might be possible to expand the base money supply without inflation while the economy has excess capacity and/or demand for safe assets like money exists even at zero interest rates, but once this capacity is used or depreciated and/or risk appetite returns, unless that expansion of base money is withdrawn, it will generate inflation. Then, either selling bonds to withdraw the excess base money will generate the sharp rise in yields that you were trying to avoid, or else allowing inflation to surge will, by imposing losses on creditors, motivate a long-lasting risk premium on future borrowing. Either way, you end up paying. - RebelEconomist Sat, 26 Mar 2011 05:59:28 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7769 The U.S. did print money during WW II and although there was significant inflation it was in no way catastrophic. There was certainly no liquidity trap by anyone's definition. There were very special circumstances and policies at that time such as removal of a large part of the work force into the military, price controls and rationing, but some of these things could also be done in peacetime if necessary. Of course tax rates were extremely high during and after the war, but this did not prevent the economy from booming and unemployment from remaining low after the war. In the 40's and 50's the Fed did not attempt to "control" inflation by raising interest rates and lifting unemployment to over 10%, as it did in the 1970's and 1980's, but inflation subsided anyway. - skeptonomist Sat, 26 Mar 2011 03:13:44 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7768 A few notable quotes from this piece: [i]the Fed could simply step in and buy whatever bonds were needed to finance the budget deficit.[/i] [i]This point is important because the deficit hawk story of the bond market vigilantes is irrelevant in either case.[/i] [i]we need the dollar to fall[/i] [i]because the United States has its own currency it would always have the option to buy its own debt. [/i] [i]The Federal Reserve Board could in principle buy an unlimited amount of debt simply by printing more money.[/i] Sorry Mr. Baker. None of these things are correct. Want to destroy this country? Follow Dean's advice. Just print money. Simple. But deadly. - Bruce Krasting Sat, 26 Mar 2011 02:36:36 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7767 [i]Does anyone believe that this would lead to inflation in the current economic situation? If so, then we should probably have the Fed step in and buy huge amounts of debt even if the bond market vigilantes don't go on the warpath because the economy would benefit enormously from a somewhat higher rate of inflation. This would reduce the real interest rate that firms and individuals pay to borrow and also alleviate the debt burden faced by tens of millions of homeowners following the collapse of the housing bubble.[/i] Are you actually serious? Food and energy costs are already outpacing income gains by a huge margin. You need to get out of your ivory tower and get out in the real world. If we go down this road, we will be looking a whole new world...one which you can not fathom. The same as the now FED washes its hands of these revolutions around the world, which at their heart are about FOOD prices skyrocketing due to dollar weakness and liquidity sloshing around where we dont want it to... ...you will be washing your hands of things like political assassinations, widespread street riots, breakdowns in economic systems. Try to built a water treatment plant or power plant with 10% inflation..... The notion that we can inflate out debts away in a controlled manner is a fantasy. You can not control where the liquidity you create goes. Look at QE1,2... Supposed to create jobs...yeah right. All it is doing is causing bubbles, weakening the dollar...and indirectly leading to all these revolutions around the world..which threaten oil prices...in a very interesting case of economic blowback... In addition, you will be bankrupting the banking sector.... Recall...they are the CREDITORS. Inflating away debts screws who? Stagnant incomes and increasing costs means the masses have less capacity to service their debts...mortgage...consumer, auto, etc. The Banks are left holding the bill... Any plan to inflate away our problems is 100% dependent on incomes rising on pace with the inflation on the cost side. That is not happening now. Please explain why it will happen if the FED is forced to expand QE to 5,6,7,8 times its current size? Finally...there is no middle ground once everyone starts thinking like Bill Gross. 10% long term rates? Keep dreaming. Private holders will not hold long term debt at all....at ANY rate. Once the only debt you can sell is short term...explain how you can inflate away your debts? Your debt rolls over to the new rates before you can get out from under your burden. The US's overall fiscal situation is in some respects WORSE than that of Greece. Just because we can print they same currency we owe our debts in does not mean we have a free pass. It just means the disaster will unfold differently.... - Brant Williams Fri, 25 Mar 2011 20:21:05 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7766 izzatzo can't even recognize who's on his own side. I'd rather have the marshals ride into town than the vigilantes. Can thugs be relied on to put things right? - Fempus Tugit Fri, 25 Mar 2011 18:29:52 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7761 [url]http://krugman.blogs.nytimes.com/2011/03/25/deficits-and-the-printing-press-somewhat-wonkish/[/url] "The key thing to remember is that current conditions — lots of excess capacity in the economy, and a liquidity trap in which short-term government debt carries a roughly zero interest rate — won’t always prevail." "once we’re no longer in a liquidity trap, running large deficits without access to bond markets is a recipe for very high inflation, perhaps even hyperinflation." - for Paul Krugman Fri, 25 Mar 2011 10:00:20 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7759 just print, huh Dean? Why work, why mess around with anything. Print money, invade countries and seize their commodities, print more money - mg Fri, 25 Mar 2011 07:46:50 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7758 Ah, but what if congress and the Fed completely abrogate their responsibility? - ang Fri, 25 Mar 2011 07:16:01 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7757 Technically, Krugman is wrong. Practically, he's right, because Obama nominated a Republican to be the Fed Chair as soon as he came into office. If the bond vigilantes suddenly returned from the Gamma Quadrant or wherever it is that that they are hiding out, the probability of the FRB acting in a logical manner is close to zero. - PeakVT Fri, 25 Mar 2011 07:07:13 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7756 Virtually all of our state governments have large budget deficits that they can't deal with except by cutting spending or raising taxes, just like Greece. Meanwhile, the federal government is just like Germany: it could bailout the states and prevent their austerity measures that are a major headwind for our economic recovery, but the feds, for no good reason, refuse to help the states with their budgets. So we are like Greece because a major part of our government spending is being forced into austerity that is counter-productive to economic recovery. Unlike Greece, Ireland, Portugal, etc., our state governments are not fighting the feds for bailouts. - Paul Fri, 25 Mar 2011 06:20:11 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7755 Krugman's comments section on this looks like everyone was practicing to write a book, so I think by now he gets the idea that his Greece reference didn't go over too well. I also chimed in, but even as fast as I did, I only score comment#125 ... But at least he gave me an "A" (highlight) on my comment. - Benedict@Large Fri, 25 Mar 2011 06:00:55 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/krugman-is-wrong-the-united-states-could-not-end-up-like-greece#comment-7751 PK said he was "under the weather" yesterday, so we need to give a break! - JTM Fri, 25 Mar 2011 04:08:22 +0100