This recent article by Krugman is short and brilliant. First,
though, the background.
As Bill Mitchell, me and numerous others have pointed out for a long time, some of the
literature emanating from the IMF (and the OECD) is nonsense. But as Krugman
points out, IMF employees are not totally stupid. So why the nonsense?
According to Krugman, the explanation
is that the IMF has to keep in sweet with rich and/or powerful idiots: the real
source of nonsensical ideas.
I’m sure there's plenty of truth there. I.e. if Stalin,
Hitler, or the Taliban ruled the world, the IMF would have to make complimentary
remarks about, respectively, Gulag Archipeligos, gas chambers, and stopping women
learning to read and write.
Having said that, my hunch is that "it's a bit of both": i.e. there are some genuine incompetents in the IMF, while competent IMF staff know they cannot say exactly what they think.
Yes, it is a brilliantly written piece from Krugman.
ReplyDeleteBut his policy conclusion is less than brilliant: "Raise the inflation target to 4 percent, dummies"!
N.B. 4% is a target, not an upper bound.
Presumably this has something to do with the possible effects of slightly negative expected real interest rates on aggregate demand and secular stagnation.
The active fiscal policy advocated by Ralphanomics is more likely to be effective.