Why is Krugman so forgiving of the ECB?

Yesterday I posted that the ECB just doesn’t “get it,” secure in the knowledge that Paul Krugman totally agrees with me on at least that one point.  And then look at what commenter Vaidas Urba sends me:

Paul Krugman from a week ago:

The good news is that the ECB does, I think, understand the problem. The bad news is that it has limited options. Europe needs something like Abenomics as badly as Japan does; but the political and institutional setting is not favorable.

And then more recently:

The thing is, I don’t believe that current management at the ECB is that different in its understanding of what policy should be doing from leadership at the Fed. But it has to struggle against an economy that is weaker in its underlying fundamentals, bad history, and a much more powerful contingent of monetary hawks.

It really is quite scary.

Over the years Krugman and I have both bashed the ECB for their almost unbelievable incompetence.  The ECB that has repeatedly raised interest rates in the midst of the biggest recession since the 1930s.  The ECB that says inflation should be targeted at 2% and we should forget about unemployment, and then later says don’t worry about the 2% target, deflation is actually healthy because it restores competitiveness.

So why is Krugman suddenly so forgiving?  Yes, the “underlying fundamentals” are weaker, due to “bad history.”  But the bad history is a tight money ECB policy that created 0.8% annual NGDP growth over 6 years.  Those are the “underlying fundamentals” that led to a negative Wicksellian equilibrium rate.  Remember that guy who killed both his parents, and then asked the judge for leniency because he was an orphan?

Krugman’s usually not so forgiving in this situation, so let’s consider some alternative explanations. This is from his recent Vox article:

And now we are talking seriously about secular stagnation in Europe and the US as well, which means that it could be a very long time before ‘normal’ monetary policy resumes. Now, even in this case you can get traction if you can credibly promise higher inflation, which reduces real interest rates. But what does it take to credibly promise inflation? It has to involve a strong element of self-fulfilling prophecy: people have to believe in higher inflation, which produces an economic boom, which yields the promised inflation. A necessary (though not sufficient) condition for this to work is that the promised inflation be high enough that it will indeed produce an economic boom if people believe the promise will be kept. If it is not high enough, then the actual rate of inflation will fall short of the promise even if people do believe in the promise, which means that they will stop believing after a while, and the whole effort will fail.

If you are confused don’t feel bad.  He’s saying that under certain liquidity trap assumptions there is no rational expectations equilibrium at 2% inflation rate.  Now that’s clearly wrong, you could peg CPI futures contracts at 2% inflation.  So what’s he really saying?  He’s saying that you can’t get 2% inflation in his particular Keynesian model.  If you got it in the real world it would be for some other reason, perhaps they ran out of government securities to buy while pegging CPI futures, and then had to buy other assets.  Viola, redefine that as “fiscal policy.”  QED.  I’ve never found those arguments at all persuasive for reasons I’ve discussed ad nauseum.  In any case, it has no bearing on what’s going on the real world, where the ECB has been doing “normal” monetary policy for most of the past 6 years, raising and lowering interest rates, and has refrained from QE.  The ECB doesn’t have to buy stocks and corporate bonds.  They need a more expansionary monetary policy.

And I’m completely confused by his comparison of US and eurozone fiscal policies in the August 13 post.  Whenever people point to the fact that Britain has run huge deficits, Keynesians like Krugman say they’ve got it all wrong; it’s the change in the deficit that matters.  And the Cameron government reduced the deficit somewhat.  But the data he presents shows the US deficit shrinking faster than the eurozone deficit since 2010.  And yet it was the eurozone that had the horrible growth performance after 2010, not the US.  (Both regions did about the same in the initial downturn.)  How does Krugman react?  Now he’s back to comparing levels–the eurozone has a smaller deficit than the US.  Either deficits matter, or changes in deficits matter; I wish Keynesians would make up their minds.

Of course market monetarists aren’t at all confused by the fact that the US has done much better than the eurozone since 2010.

PS.  Perhaps he’s soft on the ECB because they are sophisticated city people, like him.  He’s only just arrived in NYC and is already ridiculing the foolish life choices of small town Americans who don’t share his love of strolling though Manhattan:

People should get enough exercise “” they will, in general, be happier if they do “” but they tend not to get exercise if they live in an environment where it’s easy to drive everywhere and not as easy to walk. People should limit their caloric intake “” again, they’ll be happier if they do “” but have a hard time resisting those giant tubs of popcorn.

I can personally attest to the importance of these environmental effects. These days, I walk around with a pedometer on my wrist “” hey, I’m 61, and it’s now or never “” and it’s obvious just how much more natural it is to get exercise when I’m in New York than when I’m in Princeton; just a few choices to walk rather than take the subway fairly easily gets me to 15,000 steps in the city, while even with a morning run it can be hard to break 10,000 in the suburbs. Also, the Bloomberg nanny-state legacy, with calories displayed on practically everything, does help curb my vices (greasy breakfast sandwiches!).

The interesting and difficult question is how, and whether, these kinds of behavioral issues should be reflected in policy. There are some conventional externality arguments for promoting walkable development “” less pollution, etc.. But can we, should we, also favor walkability and density because it promotes good habits? How far should regulation of fast food go? Etc., etc.

Also, isn’t it kind of interesting that these days big-city residents on average lead more “natural” lives, being outside and getting around on their own two feet, than “real Americans” who live in small cities and towns?

Yup, small town Americans sure are stupid.  They’d be much happier if only they’d listen to Paul Krugman’s advice.


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53 Responses to “Why is Krugman so forgiving of the ECB?”

  1. Gravatar of Anthony McNease Anthony McNease
    18. August 2014 at 06:38

    “How does Krugman react? Now he’s back to comparing levels-the eurozone has a smaller deficit than the US. Either deficits matter, or changes in deficits matter; I wish Keynesians would make up their minds.”

    I think there are only 2 possibilities: He is fundamentally confused, or he’s changing arguments to fit the facts. Given his past I’m going to go with the latter possibility. But I’d argue that earlier on in the same paragraph he is genuinely confused:

    “He’s saying that under certain liquidity trap assumptions there is no rational expectations equilibrium at 2% inflation rate. Now that’s clearly wrong, you could peg CPI futures contracts at 2% inflation. So what’s he really saying? He’s saying that you can’t get 2% inflation in his particular Keynesian model. If you got it in the real world it would be for some other reason, perhaps they ran out of government securities to buy while pegging CPI futures, and then had to buy other assets. Viola, redefine that as “fiscal policy.” QED. I’ve never found those arguments at all persuasive for reasons I’ve discussed ad nauseum.”

  2. Gravatar of Vaidas Urba Vaidas Urba
    18. August 2014 at 06:51

    Scott,

    I think the explanation is very simple – the ECB really understands the problem, and is planning the steps to address it in addition to what it has already done.

    I think there are three main differences between the USA and the Eurozone:
    – underlying fundamentals of Eurozone are not as good, accordingly the Taylor Frontier is in a worse position, making the job of the ECB harder
    – the ECB has followed the prescription of rules-based monetary policy in 2011, while the Fed has ignored the Taylor rules
    – instead of QE, the ECB has used other tools – LTROs

    Some observers say the only reason QE works is the signaling effect. The performance of the Eurozone is a datapoint, albeit a weak one, against this view.

  3. Gravatar of Joseph Joseph
    18. August 2014 at 07:05

    To be fair to Krugman, he usually implicitly draws a distinction between the professional economists at the ECB, Mario Draghi, and the ECB’s monetary policy committee as a whole. He is usually harsh on the monetary policy followed by the ECB, and the policy committee, if not as strongly as you.

  4. Gravatar of Andy Harless Andy Harless
    18. August 2014 at 07:50

    You mock Krugman at the end for making what I think is ultimately a libertarian point: that we should reduce regulations that currently limit urban density.

  5. Gravatar of benjamin cole benjamin cole
    18. August 2014 at 07:58

    For decades we watched the Bank of Japan suffocate Japan. Now we watch the ECB suffocate Europe. Is there any explanation for the behavior of central bankers?

  6. Gravatar of J.V. Dubois J.V. Dubois
    18. August 2014 at 08:07

    Vaidas: I don’t really see why what you say should be true. Everything we have seen so far from ECB really points in a way that they don’t know what they are doing.

    1) Their public statements. For instance in June 2013 Mario Draghi answered a question by spanish journalist that said how is it possible that ECB is not doing anything with Spain having 27% unemployment and inflation well below 2%. Dragh’s answer?

    “First, the fact that inflation is low is not, by itself, bad; with low inflation, you can buy more stuff.”

    You cannot make this stuff up. I mean how inept a central banker you have to be to ever utter such a thing, especially on an official press conference for such a crucial question?

    2) Ok, maybe the ECB on average is more progressive than it’s governor. So where do we say this in action? Do they really understand what they have to do and then just randomply increase interest rates in the middle of recession as in 2011?

    My theory is that maybe Krugman and other people talked to some ECB staff or maybe even with one or sane members of ECB Governing Council and think that they are all right. Only they truly are not. Not if you judge them by their speech and sure as hell not if you judge them by their actions – which sadly in case of Central Bank may very well be the same thing int the end.

  7. Gravatar of J.V. Dubois J.V. Dubois
    18. August 2014 at 08:09

    PS: Just for those curious, Draghi’s “with low inflation you can buy more stuff” response can be found here (last question): http://www.ecb.europa.eu/press/pressconf/2013/html/is130606.en.html

  8. Gravatar of ssumner ssumner
    18. August 2014 at 08:29

    Vaidas, You said:

    “to address it in addition to what it has already done.”

    Just to be clear, what they have “already done” is create a 6 year depression with a tight money policy. However I concede it’s possible that they now get it, if that awareness occurred very recently, say in the past few weeks. It wasn’t too long ago, however, that they were making some pretty silly claims. All I can do is react to what I hear them say and see them do.

    The worse underlying fundamentals are due to the ECB’s tight money policy, which creates a much lower Wicksellian equilibrium rate.

    Joseph, Maybe, but what matters to most people is the views of the policymakers, not the professional economists that advise them. It’s the policymakers we need to hold accountable.

    Andy, Not really, I mock him for pretending to know what makes other people happy, better than they themselves know. Krugman does not recommend deregulation in the passage I quoted, although the logic of his argument is certainly consistent with that view, as you say. Instead Krugman recommends more regulation. I don’t recall Krugman putting the terms “deregulation” and “good idea” in the same sentence for at least a decade. When he starts advocating deregulation I will praise him. Until then I’ll praise Yglesias, who isn’t reluctant to admit that deregulation is often a good idea.

  9. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    18. August 2014 at 08:31

    When it comes to interest rates being a useful indicator of monetary policy, Krugman is like a pitbull with his jaws locked onto a mailman’s ankle; he just can’t let go!

  10. Gravatar of Vaidas Urba Vaidas Urba
    18. August 2014 at 09:46

    @J.V. Dubois

    1) “First, the fact that inflation is low is not, by itself, bad; with low inflation, you can buy more stuff.” – Draghi could have said it differently – inflation is temporarily below target because of lower commodity and food prices (a positive AS shock).

    2) The governing council was unanimous in supporting June easing package which included negative interest rates and expansion of ECB’s balance sheet.

  11. Gravatar of Vaidas Urba Vaidas Urba
    18. August 2014 at 10:13

    Scott: “Just to be clear, what they have “already done” is create a 6 year depression with a tight money policy.”

    ECB’s policy was too tight in 2008-09 (but Fed’s policy was even tighter at the same time as measured by inflation breakevens. The ECB did a big mistake in 2011 which the Fed has avoided. However, when I wrote “already done”, I had 2013-2014 in mind. If one takes a Woodfordian point of view, it is easy to forgive Draghi – if you would estimate ECB’s and Fed’s 2014 reaction functions and compare the Taylor parameters, you would see that there is not much difference between them.

  12. Gravatar of Randomize Randomize
    18. August 2014 at 10:45

    Scott,
    I took Krugman’s comments re: walking vs. driving to mean that the urban environment is friendlier for walking than a rural one and thus, people in Cities tend to walk more. Nowhere did he accuse small-town residents of being stupid.

  13. Gravatar of Joseph Joseph
    18. August 2014 at 12:11

    Scott,

    I feel like Krugman has been harsh on the policy makers, and doubly so by pointing out that the ECB’s own staff economists are saying things 100% at odds with what the statements from policy officials have been. His focus may be slightly different than yours, in criticizing the motives behind the ECB’s policy and not as sharp a focus on policy itself.

    From your second link, there’s definitely criticism of ECB policy and a bit of a jab at the political economy behind it:
    “This says that Europe really, really needs to keep inflation expectations from sliding “” in fact, it almost surely needs expected inflation higher than 2 percent. In fact, however, the ECB has been much less successful than the Fed at keeping expected inflation from declining

    And this reflects past policy choices and what they say about institutional biases. In the US, Janet Yellen and associates have been quite clear that they are prepared to take some inflation risks on the upside in order to avoid the “nightmare scenario” of raising rates only to discover that the economy was weakening again, and thereby deepening the liquidity trap. In Europe, however, the nightmare scenario isn’t hypothetical: it happened both in 2008 and, incredibly, again in 2011. And the sadomonetarists at the BIS and elsewhere continue to have much more influence in Europe than in the United States.”

  14. Gravatar of J. V. Dubois J. V. Dubois
    18. August 2014 at 14:05

    Vaidas: If you use Bernanke’s advice and measure the stance of monetary policy by nominal variables like NGDP growth and inflation then ECB has to be one of the worst. Scott already mentioned terrible track record of NGDP. As of now the inflation in Eurozone is 0.4%. But maby Draghi still thinks that Eurozone is experiencing a large aggregate supply shock and there is nothing to see?

    If this is what passes as monetary easing by ECB i fear what will happen if they ever tighten.

  15. Gravatar of Willy2 Willy2
    18. August 2014 at 14:15

    It’s sad to see Krugman doesn’t get it. “Abenomics” doesn’t work and it won’t work.

    In that regard monetary policy is extremely simple and far from “complex”. If people don’t want to “move” then monetary policy is “dead meat”.

    Calling monetary policy “perplexing” is an admission one Scott Sumner doesn’t understand how the economy works. There’re only a handful of people who have a good understanding of what’s going on.

  16. Gravatar of Willy2 Willy2
    18. August 2014 at 14:19

    The ECB and the FED DO NOT determine interest rates !!!! That’s determined by a force called “Mr. Market”. In a true free market all players combined determine rates, NOT some policy wonks at a central bank.

  17. Gravatar of ChargerCarl ChargerCarl
    18. August 2014 at 16:10

    Scott I think you’re suffering from krugman derangement syndrome here.

  18. Gravatar of SG SG
    18. August 2014 at 17:14

    Scott has blogged about how he’s felt like a crazy person as he’s watched the profession abandon conventional economic frameworks in favor of exotic, incoherent narratives about housing bubbles, financial stability, systemic risk, etc.

    That’s how I feel reading about secular stagnation. Whatever other faults he may have, Krugman is a gifted “explainer,” but get a load of this:

    “For those new to or confused by the term, secular stagnation is the claim that underlying changes in the economy, such as slowing growth in the working-age population, have made episodes like the past five years in Europe and the US, and the last 20 years in Japan, likely to happen often. That is, we will often find ourselves facing persistent shortfalls of demand, which can’t be overcome even with near-zero interest rates.

    Secular stagnation is not the same thing as the argument, associated in particular with Bob Gordon (who’s also in the book), that the growth of economic potential is slowing, although slowing potential might contribute to secular stagnation by reducing investment demand. It’s a demand-side, not a supply-side concept. And it has some seriously unconventional implications for policy.” (emphasis added)
    http://krugman.blogs.nytimes.com/2014/08/15/secular-stagnation-the-book/?module=BlogPost-Title&version=Blog Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

    Now, I’m not a nobel-prize winning economist, so maybe treating population growth as a nominal variable has some intelligible explanation. If so, I’d love to hear it.

  19. Gravatar of Simon Simon
    18. August 2014 at 18:24

    I tend to agree with Joseph. Krugman is simply not very precise on who he loves and hates at the ECB. He probably trusts people like Draghi and Praet, but strongly distrusts any Bundesbank influence. To see why he trusts Draghi, one simply has to look at the gradual shift in ECB-policy after Draghi took over from Trichet. It’s quite remarkable, to say the least, although still far from optimal.

  20. Gravatar of Riccardo Leggio Riccardo Leggio
    18. August 2014 at 19:27

    Krugman has a legitimate point about the irony of NYC offering a healthier lifestyle than many more “normal” American places. Your slamming him for that is uncharacteristically churlish.

  21. Gravatar of CMA CMA
    18. August 2014 at 20:15

    “If you are confused don’t feel bad. He’s saying that under certain liquidity trap assumptions there is no rational expectations equilibrium at 2% inflation rate. ”

    I dont understand what you’re saying here. The paragraoh you quoted seems to imply that inflation expectations are below 2%.

  22. Gravatar of Major.Freedom Major.Freedom
    18. August 2014 at 22:05

    “The ECB that has repeatedly raised interest rates in the midst of the biggest recession since the 1930s.”

    Increasing interest rates are generally a sign that money has been loose. Sumner’s words.

    Higher interest rates do not mean tighter money and lower interest rates do not mean looser money. Sumner’s words.

    Now we’re being told increasing interest rates imply tight money.

    I love it when a hodge podge theory of economics hodge podges away whenever the desire for more inflation needs justifyin’.

    It’s like logical consistency is a vice.

  23. Gravatar of Ben J Ben J
    18. August 2014 at 23:13

    Major,

    Do you not understand the point Sumner makes and Milton Friedman often made, or are you being deliberately disingenuous?

    The latter is troubling because it’s unlike you, but the former is even more troubling since you consistently admonish people who seek to discredit Austrian theory and concepts by first misrepresenting them.

  24. Gravatar of Daniel Daniel
    18. August 2014 at 23:31

    Ben J

    Do you ask cats what they think of quantum mechanics ?

  25. Gravatar of Vaidas Urba Vaidas Urba
    18. August 2014 at 23:38

    Scott, J.V. Dubois,

    I measure the stance of ECB’s policy by NGDP expectations. When Draghi started, NGDP expectations were very low and markets were signaling a possible disintegration of the Eurozone. NGDP expectations have improved a lot since Draghi started, but of course even larger improvement is needed. If 2014 June package doesn’t work, Draghi will do more.

  26. Gravatar of CMA CMA
    18. August 2014 at 23:54

    “I measure the stance of ECB’s policy by NGDP expectations.”

    At the start of the soccer world cup did you measure the stance of the USA soccer team by what people expected their result would be?

    Unless the fed is almighty expectations don’t equal stance. Fed cant be almighty. I dont know of anything in this world that is without fault or limitation. The feds will is manifest into reality is what your saying.

  27. Gravatar of Daniel Daniel
    19. August 2014 at 00:21

    Fed cant be almighty.

    They own the printing presses. They can print as much money as they like.

    Technically, they are almighty.

    The limitations are political, caused by people’s mental blocks. Such as yours.

  28. Gravatar of J.V. Dubois J.V. Dubois
    19. August 2014 at 02:21

    Vaidas: Mario Draghi started his office on November 1st 2011 – when interest rates were still at 1.5% after disastrous 0.5% hike in April/July and only 2 days before ECB started to correct a mistake that was pretty obvious by then. Saying that the ECB stance “improved” after such a performance is really setting the bar incredibly low.

    Also saying that ECB could “will do more” in the midst of 0.4% inflation and massive unemployment 6 years into the recession is in a way part of a problem. If you have faith that ECB will do more that also means it *can* do more and what is important they even *know* that they can do more. But then the question is – why did they not do more three or two or one year ago? What are they waiting for? End of positive aggregate supply shock?

    And by the way I do not buy Krugman’s view that ECB is full of enlightened people that are politically helpless. ECB was powerfull enough to embark upon politically very precarious LTRO programme. And unlike keeping inflation at 2% directly buying government debt was outright prohibited. Yet somehow ECB was able to overcome strong political opposition from powerful member countries and went with their policies to provide liquidity to banks. I wish they were so bold when it came to their main objective – macroeconomic stability.

    So to be short, anyway you slice it ECB policy is a massive disaster.

  29. Gravatar of Jim Glass Jim Glass
    19. August 2014 at 04:08

    At the start of the soccer world cup did you measure the stance of the USA soccer team by what people expected their result would be?

    Pretty much so, yes, and it turned out correct.

    Right now NFL team leaderships are being judged in a big way by the Vegas line on their over-under W-L projected for the coming season — and most of these judgements are going to be pretty accurate on the whole. With the ones made this way more accurate than those made any other way.

    And financial markets have even more money on the line than sports gamblers motivating them to make accurate expectations about the consequences of central bank policy.

  30. Gravatar of Nick Nick
    19. August 2014 at 04:30

    ‘Right now NFL team leaderships are being judged in a big way by the Vegas line on their over-under W-L projected for the coming season “” and most of these judgements are going to be pretty accurate on the whole. With the ones made this way more accurate than those made any other way.’

    Actually this is a slight misunderstanding. Season O/U aren’t very sharp. This is bc people with a truly strong conviction in their ability to price NFL results don’t want to tie up their money on season long bets. Your season O/U ticket doesn’t trade on a secondary market, and you can’t borrow against it easily. So the game lines are what display the true predictive power of the market. If you want to put together a little model and try to beat the season O/U go ahead–you won’t be competing with the smart / fast money.
    Of course you still have to beat the vig
    😉

  31. Gravatar of Steven Kopits Steven Kopits
    19. August 2014 at 06:44

    I live in Princeton. It’s not hard to walk here.

    And, of course, the big difference between Europe and the US after 2010 is that the US has shale oil, and the Europeans don’t. We have been able to offset higher oil prices with import substitution. The Europeans have had to adjust, in some cases, with substantially reduced oil consumption. For example, US oil consumption is up just a bit over the last year; European consumption continues to fall, down -2.0%; Japan is down -2.8%.

    At the same time, there’s no doubt that monetary policy is too tight for the southern tier European countries. The Euro has essentially enabled Germany to implement a beggar-thy-neighbor policy.

  32. Gravatar of mikef mikef
    19. August 2014 at 08:10

    Gee, I’m sure I would be much happier and healthier if me and the wife and kids and dog all lived in a 500 sq. ft. box in the sky. It would be like being on vacation all year round. Silly me…I actually thought that stepping away from my computer screen was the move to make.

    I guess it all depends on how far you are from a subway stop and whether the elevator is working vs. how big the parking lots and malls are in the suburbs. I guess Paul does not visit the Mall of America that often.

  33. Gravatar of Scott Sumner Scott Sumner
    19. August 2014 at 09:03

    Vaidas, I don’t regard the fact that certain decisions fit the Taylor parameters as any sort of excuse. The Taylor rule is a bad policy, and people who adhere to it when it drives NGDP lower should be criticized.

    The Fed also cut interest rates sharply in 1929-33–was that a good policy?

    Randomize, That’s not how I took it. He seemed to claim people would be happier if they walked more—like he does. And I can’t imagine anyone believing that the rural environment is not conducive to walking.

    Joseph, Yes, he’s often harshly criticized the ECB.

    Chargercarl, Oddly, this is one of the few Krugman posts that did not cause me to be “deranged,” just bemused. So your comment belongs elsewhere.

    SG, Good catch, that’s worth a post.

    Riccardo, You said;

    “Krugman has a legitimate point about the irony of NYC offering a healthier lifestyle than many more “normal” American places. Your slamming him for that is uncharacteristically churlish.”

    Yes it would have been churlish if I had done that. But of course I did not.

    CMA, Read his whole post.

    Vaidas, You said:

    “If 2014 June package doesn’t work, Draghi will do more.”

    Of course it’s not enough, what’s he waiting for? If policy is on target then errors should be symmtrical. Does Draghi worry just as much about fast eurozone growth as slow eurozone growth? I doubt it.

  34. Gravatar of TallDave TallDave
    19. August 2014 at 10:21

    But what does it take to credibly promise inflation? It has to involve a strong element of self-fulfilling prophecy: people have to believe in higher inflation, which produces an economic boom, which yields the promised inflation.

    This is so completely wrong it’s just mind-boggling. All it takes for a CB to credibly promise higher inflation is to promise higher inflation and then act like they mean it.

    There’s a couple gross fallacies in the paean to city life there. I live in a nice suburb where parks for my toddlers abound, but if I moved to the city I’d have to dodge gunfire every time we went outdoors, and in any case anaerobic exercise consumes vastly more calories because of recovery. Also, biochemistry dictates that the number of calories consumed is not nearly as important as the composition of those calories. Krugman should really stop getting fitness advice from Michelle Obama.

  35. Gravatar of Vaidas Urba Vaidas Urba
    19. August 2014 at 10:22

    Scott: “I don’t regard the fact that certain decisions fit the Taylor parameters as any sort of excuse.”

    The interesting question is “What would Bernanke do if he was in Draghi’s place?” And the answer is – there would not be much difference. There are some slight differences in their approach, but market reaction to ECB and Fed easing measures is very similar.

  36. Gravatar of Student Student
    19. August 2014 at 11:37

    While I find city dwellers and their skinny jeans, fancy suits, hair products, pedicures, and lattes annoying as hell and would much rather go fishing, shooting, or mudding than go to an art gallery or coffee house… on average, small towners are fatter, walk less, eat worse, smoke more, and are less educated. Them’s just the facts. They probably would be better off if they took some of Krugman’s advice on walking a little more.

  37. Gravatar of mikef mikef
    19. August 2014 at 17:12

    Urban dwellers are more much more likely to be single and be without kids. They are more likely to have higher incomes and be more educated. They are not who they are because they live in the city….they choose to live in the city because it fits who they are….

    I doubt very much that if you transplanted your small towner into a downtown apartment that they would be thinner…

    Like many of Krugman’s arguments…he has the cause and effect mixed up. I think he needs to give his gardener and housekeeper a vacation…buy a walk behind lawnmower and grow himself some vegetables in the backyard and see how many steps he takes in a week.

  38. Gravatar of Student Student
    19. August 2014 at 17:28

    I think that walking more is causally related to being healthier, period.

  39. Gravatar of Daniel Daniel
    19. August 2014 at 23:05

    Vaidas,

    Would you kindly cut the bullshit ?

    The ECB kept the eurozone in a recession for six years. And it has no intention of stopping any time soon.

    That’s dreadful, no matter how you look at it.

    What’s in it for you ? Why are you defending such a dreadful performance ?

  40. Gravatar of Vaidas Urba Vaidas Urba
    19. August 2014 at 23:27

    Daniel,

    I am interested in policy errors, you are interested in character flaws. I am interested in forward-looking analysis, and you are not.

  41. Gravatar of Daniel Daniel
    20. August 2014 at 00:19

    I am interested in policy errors

    The ECB has been doing that for the past 6 years

    I am interested in forward-looking analysis

    A first step would be to stop rationalizing and demand accountability for dreadful performance.

    Let me know when you start doing that.

  42. Gravatar of Vaidas Urba Vaidas Urba
    20. August 2014 at 01:44

    Daniel,

    I am not denying ECB policy errors. I am saying the ECB has improved a lot, and I am saying their analysis is not that different from analysis done at the Fed.

    How does demanding accountability help you forecast future developments?

  43. Gravatar of Daniel Daniel
    20. August 2014 at 03:48

    I am saying the ECB has improved a lot

    Ummm … no it hasn’t. What exactly does this improvement consist of ? Giving vague statements at press conferences ?

    How does demanding accountability help you forecast future developments?

    I find it very curious that the lessons of corporate governance seem to be totally lost on macroeconomists.

    Why do you think it is that corporate executives are held responsible ?

  44. Gravatar of ssumner ssumner
    20. August 2014 at 05:15

    Vaidas, No, the interesting question is what would Bernanke do if he was in change of the Fed from 2006-14. He was not really in change. The FOMC was. If he had been in charge he would have done more.

    Bernanke was privately very critical of the ECB.

    If you look close enough, scientifically enough, all actions are deterministic responses to a particular configuration of atoms in the universe. That doesn’t make them beyond criticism. To explain is not to forgive.

    Student, Those averages might be true, but I fail to see what they have to do with my post. Did I say they were not true?

    Mike, Yes, when I was younger, “urban” was a sort of euphemism for poverty and misery. It’s not about the location, it’s about the people that live in that location.

  45. Gravatar of Student Student
    20. August 2014 at 06:10

    “Yup, small town Americans sure are stupid. They’d be much happier if only they’d listen to Paul Krugman’s advice.”

    I just interpreted this very sarcastically. As if for some reason small towner’s wouldn’t benefit from walking a little more. That seemed dumb to me. I was trying to say that there are in fact a few things rural folks could gain from acting a little more like their more urban neighbors, even though they are in no way superior to them (as I said, i am more a rural personality than an urban one in the first place, even though i live near an urban area).

    As well, I am not sure Krugman has the cause and effect mixed up and it’s far from an established fact that he does. I am not so sure that urban folks tend to be in better shape because people that prefer to live healthier self-select into an urban environment. I wouldn’t doubt that is true to some extent but I also would guess that being in an urban environment friendly to walking makes people walk more, I know it does for me. Also, I can tell you my sister lost over 40 pounds living in London because she walked everywhere instead of driving. I know that’s anecdotal but its not like there is conclusive evidence to rely on instead.

  46. Gravatar of W. Peden W. Peden
    20. August 2014 at 06:54

    “Also, I can tell you my sister lost over 40 pounds living in London because she walked everywhere instead of driving.”

    Although given what the air in London is like, she might have been better off spending the money to (a) exercise at home and (b) take up a 10-cigarette-a-day smoking habit.

  47. Gravatar of Student Student
    20. August 2014 at 07:37

    The desire by folks to reason every which way other than that walking from place to place is simply good for you is astounding. So she is better off driving, exercising at home, and smoking a half a pack a day out in the boone docks? wtf? And the air quality in London is bad because…. oh yeah, so many vehicles on the road, damn that walking.

    I’ll tell you what, I will continue to walk/bike around and do a little HIT every other day, you can continue to drive your car everywhere you go and then make time later to exercise at home. I will continue to drink fresh vegetable juice and eat salads like liberal douche and you can eat your fast food and bbq (tho i do love me some bbq) out in fresh clean air. That all aside, walking is still better for you than driving.

    Such reluctance to admit such an obvious and well founded simple fact, damn.

  48. Gravatar of Chris Mahoney Chris Mahoney
    20. August 2014 at 10:57

    There are two PKs: the economist and the leftist. The leftist believes in big government, fiscal deficits and high taxes, as well as income-redistribution. He hates small government and “austerity”. The economist knows that the eurozone has a monetary problem, but faster NGDP growth lifts all boats and does not adequately redistribute income. So he emphasizes fiscal policies which enable the wonders of socialism and income equality.

  49. Gravatar of mikef mikef
    20. August 2014 at 13:14

    Student,

    The point is that in the US today most people are not forced to get much exercise in their daily lives…whether you live in the city, suburbs, a small town, the country (cities have mass transit..even if you don’t have a car). You need to make a conscious decision to get exercise and also to eat well. I’ve never thought these had any relationship to your political affiliation. I’m smart enough to take control of what I put in my body. If they are advocating that food stamps should be more selective about what foods they can be used for …then I guess this might make some sense to me….but I don’t need paternalistic government outlawing big gulps..I am smart enough to avoid them on my own.

  50. Gravatar of Student Student
    21. August 2014 at 04:28

    Last comment on this as we are way off topic (though it has been fun anyways). I fail to see where anyone was suggesting that people be forced to exercise. Seems like the point was that urban structures facilitating walkability tend to make people walk more and so live healthier lives. Further, rural americans tend not to get enough exercise and would most certainly benefit from walking more and driving less. It’s good for them, good for the environment, good for America as a whole. It’s a rather simple concept. It’s funny that you think people are smart enough to avoid big gulps but yet we should make what you can buy with food stamps more controlled by the government. Seems like big government is good for some people, just not you. As well, I was on food stamps as a teenage parent paying my way through school (god bless america, the lan of second chances). And they do (at least did) restrict some things you could buy and there were plenty of folks around judging your every selection, believe me. Buy some salmon with your good stamps and there are plenty of people around to comment on how expensive it is in spite of the fact it may be one of the most efficient (ie filling per ounce) and nutritious sources of protein out there (the omega 3 to 6 ratio is quite high). My point is that krugmans advice to walk more is good advice, period.

  51. Gravatar of ssumner ssumner
    21. August 2014 at 15:46

    Student, Don’t you find it a bit odd that Krugman of all people would be giving people advice on how to be happy?

  52. Gravatar of mikef mikef
    22. August 2014 at 04:37

    Student,

    I’m not in favor of any of the government programs or laws to try to get people to eat better. I know first hand how counterproductive they have been. Take my favorite…the school lunch program. It has taught a generation of kids that vegetables are disgusting.
    I should know, I have school age children. My son refuses to eat any vegetables, something that he learned in school. They put poorly prepared vegetables in front of kids so they can qualify for a federal program and 100% (not 99%, but 100%) immediately get thrown out and they come home and refuse to eat any at home also. The only way I can get vegetables into my son is to hide them. (finely chopped up in spaghetti sauce). Prior to entering school, I could at least get him to try them…and I tried creative ways to make them taste good. I think it would be much more successful to have a couple tasty dishes per week than slop on canned spinach on the plate and act like you have given them “healthy choices”. And I am sure that the school district would probably do that if they where not under federal mandates.

    Yes, walking is good…but that is not his advice…he is trying to lay the groundwork for inane government policies.

  53. Gravatar of Student Student
    22. August 2014 at 10:24

    Ok, so it wasn’t my last comment.

    Scott, haha, yes, in fact that is funny, considering he seems so grumpy all the time.

    mikef, fair enough. I was one of those kids that hated, and i mean hated vegetables. Turns out, it was because i always had canned vegetables as a kid. Canned vegetables are freaking disgusting. Frozen taste somewhat better, but it wasn’t until my wife came along and introduced me to fresh vegetables that I could manage to eat them.

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