Rogoff and Reinhart on Krugman

Update:  I’d encourage people to look at David Warsh’s post, and also Jim Hamilton’s.  The Warsh post is from an admirer of Krugman, and is especially interesting.  (HT:  Tyler Cowen and Marcus Nunes.)

I used to think that Ken Rogoff’s 2002 letter to Joe Stiglitz was the most devastating demolition of the arguments of an esteemed (but rude) economist that I’d ever read.  But now we have a new open letter to Paul Krugman:

We admire your past scholarly work, which influences us to this day.  So it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks.  You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts.  Now you have doubled down in the New York Review of Books, adding the accusation we didn’t share our data.  Your characterization of our work and of our policy impact is selective and shallow.  It is deeply misleading about where we stand on the issues.  And we would respectfully submit, your logic and evidence on the policy substance is not nearly as compelling as you imply.

.  .  .

The accusation in the New York Review of Books is a sloppy neglect on your part to check the facts before charging us with a serious academic ethical infraction.  You had already implicitly endorsed this from your perch at the New York Times by posting a link to a program that treated the misstatement as fact.

Fortunately, the “Wayback Machine” crawls the Internet and periodically makes wholesale copies of web pages. The debt/GDP database was first archived in October 2010 from Carmen’s University of Maryland webpage.  The data migrated to in March 2011.  There it sits with our other data, on inflation, crises dates, and exchange rates.  These data are regularly sought and found for those doing research who care to look. The greater disclosure of debt data from official institutions is testament to this.  The IMF began to construct historical public debt data only after we had provided a roadmap in the list of our detailed references in a 2009 book (and before that in a 2008 working paper) that explained how we had unearthed the data.

Our interaction with scholars and practitioners working on real world questions in our field is ongoing, and our doors remain open. So to accuse us of not sharing our data is an unfounded attack on our academic and personal integrity.


HT:  Greg Mankiw



59 Responses to “Rogoff and Reinhart on Krugman”

  1. Gravatar of AldreyM AldreyM
    26. May 2013 at 10:46

  2. Gravatar of foosion foosion
    26. May 2013 at 10:55

    To the claim they did not share date, they say “The debt/GDP database was first archived in October 2010 [] from Carmen’s University of Maryland webpage”

    Perhaps I’m reading too quickly, but I can’t find their data on the linked page. Mainly I see an ad for their book.

    I’ve read numerous statements from people who asked for the data but were refused. Are there contrary stories?

    Krugman’s response was, in essence, you made a provocative claim about a 90% cliff, it helped promote austerity, you loudly endorsed this (with occasional whispers to the contrary), you were wrong. In many other fields this sort of error would have major consequences.

  3. Gravatar of ssumner ssumner
    26. May 2013 at 11:04

    foosion, You said;

    “Perhaps I’m reading too quickly”

    Yeah, I’d say so. Try reading it again.

    And yes, that was Krugman’s response. And it’s wrong, as R-R document.

    Of course Krugman’s also wrong about the impact of austerity, as it’s tight money causing slow growth in developed economies, not “austerity.”

  4. Gravatar of david david
    26. May 2013 at 11:12

    I think it’s a reference to the “This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises” posted on the site.

    Which is “data” only in the dodgiest sense of giving sources and recoding methods and then letting you, the verifier, go dig up all the numbers from all the separate national agencies and try to process them the same way as they did.

  5. Gravatar of JJriverrun JJriverrun
    26. May 2013 at 11:13

    Carmen’s letter is indeed very well written and lays out some of the (increasingly obvious) shortcomings in Krugman’s way of prefacing the “austerity” debate. If only economists could find a way to stop screaming past one another and uniformly call for easier monetary policies along with structural reforms I think the world would be better off. Unfortunately, the pissing matches will continue.

  6. Gravatar of F. Lynx Pardinus F. Lynx Pardinus
    26. May 2013 at 11:33

    For clarification, the Herndon paper says “On their website, Reinhart and Rogoff provide public access to country historical data for public debt and GDP growth in spreadsheets with complete source documentation. However, the spreadsheets do not include guidance on the exact data series, years, and methods used in RR. We were unable to replicate the RR results from the publicly available country spreadsheet data although our initial results from the publicly available data closely resemble the results we ultimately present as correct. Reinhart and Rogo ff kindly provided us with the working spreadsheet from the RR analysis. With the working spreadsheet, we were able to approximate closely the published RR results.”

  7. Gravatar of Lesson1 Lesson1
    26. May 2013 at 11:47

    Debt/GDP Ratio GDP Growth Rate
    30% or less 4.6%
    30-60% 2.8%
    60-90% 2.7%
    90%+ -0.7%

  8. Gravatar of Charlie Charlie
    26. May 2013 at 11:58

    Why do they keep saying we never assert that the Debt/Growth relationship is causal and then repeatedly assert that the debt/growth relationship is causal?

    In their very first response:

    “By the way, we are very careful in all our papers to speak of “association” and not “causality” since of course our 2009 book THIS TIME IS DIFFERENT showed that debt explodes in the immediate aftermath of financial crises.”

    They spend most of this response arguing that this relationship is causal.

    In Krugman’s response today:

    “To some extent it lies in the downplaying of causality issues “” of whether high debt causes slow growth, slow growth causes high debt, or both high debt and slow growth are the result of third factors”

    Don’t you mostly agree that the debt/gdp is caused by a third factor (bad monetary policy)? RR argue Italy has causation running from debt to slow growth, but don’t you think the causation is running from the ECB to slow growth to debt?

    You’ve mostly been critical of RR (well before the Herdon paper), what exactly are you praising them for here? Is their some part of their analysis you agree with or do you just think PK has been unfair and/or mean?

    I think they’ve basically handled this terribly. The only reason we are still talking about the RR mistake as opposed to the Niall Ferguson mistake (Keynes/gay/long run) is that R and R aren’t very good at managing their PR.

  9. Gravatar of jeff jeff
    26. May 2013 at 12:39

    but since 2002 the imf has completely reversed its position (re east asia crisis that means — tight money, capital controls, austerity) to the stiglitz view. and, reinhart rogoff seems to be overstating here again. i guess what counts as “devastating” is in the eye of the beholder.

  10. Gravatar of ssumner ssumner
    26. May 2013 at 12:56

    Jeff, It’s obvious you have not read Rogoff’s 2002 letter, because your comments have little to do with his points. That’s fine. But then don’t think your views are going to persuade anyone who has taken the time to read the letter.

    Some of Stiglitz’s observations about the East Asian crisis made EC101-level errors. Did Indonesia have “tight money”?

  11. Gravatar of Steve Steve
    26. May 2013 at 13:00

    ssumner wrote: “Of course Krugman’s also wrong about the impact of austerity, as it’s tight money causing slow growth in developed economies, not “austerity.””

    Krugman is working on this. He will redefine “tight money” as “monetary austerity” and then claim he was right all along about the costs of austerity.

    He’s already done this in the other direction — it was easier since “easy money” is often referred to as “monetary stimulus” and then can be ambiguated with “fiscal stimulus” by the shorthand of “stimulus”. Krugman’s always been an advocate of “stimulus”, eh?

  12. Gravatar of ssumner ssumner
    26. May 2013 at 13:00

    Jeff, Which part of R-R’s recent letter is inaccurate?

  13. Gravatar of jeff jeff
    26. May 2013 at 13:29

    Scott, the letter was about Stiglitz’s book “Globalization and it’s discontents”. The letter was read out by Rogoff at the book launch held at the Bank. The context was the disagreement between the Fund and the Bank over the Fund’s handling of the crisis — in particular their advocacy of high interest rates to protect the currency, opposition to capital controls and support for austerity. Rogoff — at the time of the letter (though not the crisis) was IMF chief economist, and defended the IMF’s policies during the crisis — e.g. “The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money…We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably”. I was just noting that IMF policies on these points are quite different now, ten years later.

  14. Gravatar of Ashok Rao Ashok Rao
    26. May 2013 at 13:35

    Scott, this is off topic, but I thought you would be interested in Ed Luce on Larry Summers as the leading candidate for Fed Chair:

    I thought his argument was tenuous, based primarily on straw men characterizations of Summers’ “critics”. I outline this here:

    Does anyone seriously think Larry Summers personality or inability to be confirmed by Congress will be serious roadblocks? That’s most of the article. Yellen’s erudition in the subject is a bygone conclusion that’s ignored in favor of the importance of Summers’ “intellectual leadership”.

    For the record, I’d prefer Romer but that is seeming less likely.

  15. Gravatar of J J
    26. May 2013 at 13:48

    Professor Sumner,

    I bet you liked this part: “Any overheating in Germany would exert pressure on the ECB to maintain a tighter monetary policy, backtracking some of the progress made by Mario Draghi.”

    Nonetheless, Krugman and Delong in their responses make a good point about the 90% threshold. In this letter, it is mentioned again, although qualified. Still, much of policy has been about the idea of a threshold and Delong demonstrates that R-R played a role in this interpretation of their results. It seems that the data do not really suggest such a threshold exists, and I would need to see pretty convincing data with many observations to believe that there is some particular important number that holds for a variety of countries.

    Moreover, I was disappointed to see lines such as these: “If governments thought high debt was a riskless proposition, why did they avoid it so consistently?…What is the foundation for your certainty that as peacetime debt hits new records in coming years, the United States will be able to engage in forceful countercyclical fiscal policy if hit by a large unexpected shock? Furthermore, do you really want to find out the answer to that question the hard way?”

    I don’t find these to be very convincing arguments. And the last question could be asked about anything; nothing is certain. The fact that risks exist does not mean we must fear the worst-case scenario.

  16. Gravatar of jeff jeff
    26. May 2013 at 13:48

    (I apologise that my original post was not more clear).

  17. Gravatar of J J
    26. May 2013 at 13:52

    Related to my first quote, I think that is actually an excellent point that holds more true for Europe than in the US. In the US, monetary offset makes the fiscal multiplier zero. But, in Europe, the fiscal multiplier for expansionary policy coming from Germany is likely to be negative. If Germany boosts domestic inflation by 1%, then that might cause small improvements elsewhere (less than the improvements caused by higher domestic inflation of 1%). But, due to disproportionately large German influence, it would cause the ECB to tighten as if eurozone inflation had gone up by a full 1%.

  18. Gravatar of Al Al
    26. May 2013 at 15:38

    F. Lynx Pardinus at 11:33 provided the appropriate response to this blog post. One can only find a devastating demolition in R-R’s letter if one is obsessed with Paul Krugman and therefore impressed with surface level arguments from his opposition.

  19. Gravatar of foosion foosion
    26. May 2013 at 16:13

    From the student who finally got their data, reacting to the R&R letter:

    “However, they also got growth data from numerous other sources, and they did not make the spreadsheet where they “put it all together” available (and actually still haven’t), so that their actual calculations could be checked, and that you could see which sources of growth data they used”

    He also explains that you can’t get to their results from the sources they list in their letter and comments from others who tried to get the data.

  20. Gravatar of marcus nunes marcus nunes
    26. May 2013 at 16:26

    The best Krugman characterization yet:

  21. Gravatar of Eric G Eric G
    26. May 2013 at 17:08

    It’s just another example of when conservative get whacked for fudging their numbers they cry foul as loud as they can.
    If Paul Krugman had done what they did including cherry picking a GDP figure (Like RR did with New Zealand) in a highly influential paper and book he would be figuratively crucified then fired and then he would disappear from the public eye. Every single Fox News program would be dedicated to it.

  22. Gravatar of F. Lynx Pardinus F. Lynx Pardinus
    26. May 2013 at 17:09

    “From the student who finally got their data, reacting to the R&R letter:”

    It is funny that this whole thing has devolved into R&R and Krugman talking past each other while Herndon is like “hey, guys, I’m over here.”

  23. Gravatar of Matt Waters Matt Waters
    26. May 2013 at 17:11

    It’s funny. I read the letter and found many economic assertions directly at odds with what I understand as Market Monetarism. Put less charitably, I find much of RR’s letter wrong.

    To get this out of the way though, there were many dodgy things concerning the 90% data and the availability of methodology. Here’s my understanding: an enterprising grad student somewhere merely attempted to reconstruct the headline figures of growth vs. debt. He earnestly tried every way he could to construct the data, but the every method he tried did not match the paper’s headline table. Finally, the grad student asked for not just the supporting data but the supporting calculations. It’s in those calculations which emerged not only the embarrassing Excel range error, but rather dubious methods of averaging growth rates in each bucket of debt/GDP. Counting one year of New Zealand data the same as 10+ years of UK data is an…odd choice. And the leverage of that one year of NZ data indeed created most of the shocking break in the data.

    R-R speak in terms which are technically correct in the letter. The data WAS in fact available to anyone, but nowhere do I see a cogent defense of their method of averaging growth rates. I also believe some countries were left out entirely of the calculation, such as post-war US, for some reason as well. Any way I’ve seen it, the lack of availability of data AND methodology should not be something that can ever stand for economics papers. Not just data, but all code and discussion of methodologies should be part of any economic research, especially one with as much influence as the RR paper on discourse. I won’t throw around terms like dishonesty, but I do think RR are following somewhat established norms which need to be changed. To talk so evasively concerning the specific issues with the methodology is unfortunate while not outright dishonest.

    RR themselves may not have directly insuinated that 90% was a magicxmal barrier, but many people ran with it. I personally remember it widely held as a magical barrier, obviating both the methodological and causation issues.

    Causation brings me to what I find so utterly erroneous in the letter, as far as economics goes. As the commenter above says, RR has essentially spent the last six months saying correlation does not imply causation, and then saying correlation does imply causation.

    To support causation, RR makes various causal arguments concerning “debt overhang” which seem to make passing sense until Market Monetarism is truly applied to the theories. Their first example is the most extreme case of a traditional IMF rescue. They argue that it’s clear that a country on the brink of default and insolvency will see lower growth.

    But if you dig deeper, RR show a disregard or ignorance concerning the two components of economic growth: employment and factors for full capacity production. If a country has the world debt markets closed off to them, the issue is typically lack of hard currency to buy commodities. Countries take IMF rescues to not have a sudden decline in RGDP due to capital inflows.

    However, such an RGDP shock does not necessarily mean a large increase in unemployment. As Market Monetarism says, a country which prints its own currency does not have a bound for reducing cyclical unemployment. Argentina after defaulting shows this, where RGDP grew strongly despite Argentina being charged usurious interest rates by debt markets.

    Next, RR use Italy as an example. It’s even more clear here their error in not seperating unemployment and real factors of production. At its core, their argument is “Italy’s high debt load has kept fiscal stimulus from happening in Italy and this causes unemployment because monetary stimulus would create German inflation.” The sleight of hand says that Italy’s high debt load is responsible for unemployment, when really tight monetary policy is the cause of unemployment.

    And that’s the rub: RR is definitely correct that sometimes high debt loads hurt RGDP. But they are simply wrong to blame debt for unemployment in Western countries today. This is utterly, beyond a shadow of a doubt, 100% wrong. Monetary is THE cause of cyclical unemployment among wester countries today. Yeah, debt can hurt the real factors of production as well, but RR has sat idly by while their theories have been used to create a false blame for unemployment, thereby helping to prolong the pain of millions of workers. Until they speak clearly and forcefully about the fact debt does not create cyclical unemployment, I can’t cheer them on against Krugman.

  24. Gravatar of W. Peden W. Peden
    26. May 2013 at 17:13

    Eric G,

    How many Fox News programs were dedicated to the Spirit Level? (Non-rhetorical question.)

    “If Paul Krugman had done what they did including cherry picking a GDP figure (Like RR did with New Zealand) in a highly influential paper and book he would be figuratively crucified then fired and then he would disappear from the public eye.”

    Hasn’t much the same thing occurred with Rogoff and Reinhart? How many papers that they publish will be taken seriously in future? Scientists SHOULD be held to high standards.

  25. Gravatar of ssumner ssumner
    26. May 2013 at 18:04

    Jeff, Take a look at the rate on inflation in Indonesia when Stiglitz said money was too “tight.” The comparisons with the eurozone crisis are off base. In 1998 those countries experienced massive devaluations–80% down in the case of Indonesia. Tight money was not the problem.

    Again, I was talking about Rogoff’s letter, not the underlying policy debate. Rogoff did NOT, and I emphasize NOT, write the letter because he disagreed with Stiglitz’s policy views on things like capital controls. He criticized the reckless style of Stiglitz’s attack.

    Read Warsh’s post. He gets it.

    Ashok, I’d prefer Richard Fisher to Summers, he’d be an unmitigated disaster.

    J, I’ve never really understood the 90% fetish. Surely there is no economist in the entire world that believes 90% is some sort of magic number. I’ve never defended that result. On the other hand Hamilton showed that the R-R results are hardly affected at all by their errors. So I think that’s much ado about nothing. Countries were not adopting austerity because of the 90% number, indeed I’m still not convinced there is all that much austerity, because I’ve never accepted the Keynesian definitions. (Although I certainly accept that in a relative sense we’ve tightened fiscal policy this year, in the US) What is a “full employment deficit” when no one knows where we are relative to full employment?

    As for the risks of fiscal stimulus, there is no risk to monetary stimulus, so why does Krugman keep demanding fiscal stimulus, even if the risk is quite modest?

    J, Yes, I need to think about the German angle. It could be a negative multiplier for others.

    Al, You said;

    “One can only find a devastating demolition in R-R’s letter if one is obsessed with Paul Krugman and therefore impressed with surface level arguments from his opposition.”

    I get these comments all the time, and they are silly. Read the Warsh post–even Krugman’s friends are abandoning on him.

    Eric, You said;

    “If Paul Krugman had done what they did including cherry picking a GDP figure (Like RR did with New Zealand) in a highly influential paper and book he would be figuratively crucified then fired and then he would disappear from the public eye.”

    You must not read Krugman’s blog, as he uses misleading data all the time. Even Krugman’s friends are abandoning him. He’s a very talented economist but his tactics have become a embarrassment to the liberal movement.

    Matt, You said;

    “The data WAS in fact available to anyone, but nowhere do I see a cogent defense of their method of averaging growth rates.”

    Read Jim Hamilton’s many posts on the subject–there are the best I’ve seen.

    You said;

    “Causation brings me to what I find so utterly erroneous in the letter, as far as economics goes. As the commenter above says, RR has essentially spent the last six months saying correlation does not imply causation, and then saying correlation does imply causation.”

    Krugman makes the same point. But I fail to see how that’s different from Krugman spending 5 years saying the Fed is out of ammunition and we need fiscal stimulus on Tuesdays, and then saying Bernanke needs to do much more monetary stimulus on Thursdays. Krugman says their mixed message was bound to be misinterpreted by policymakers. Let’s say that’s true. How is that any different from Krugman’s mixed message, which has indisputably been misinterpreted, even by his fans.

    W. Peden, You said;

    “Hasn’t much the same thing occurred with Rogoff and Reinhart? How many papers that they publish will be taken seriously in future? Scientists SHOULD be held to high standards.”

    Actually lots of them will be taken seriously. That’s because economists know that many published papers have the same sort of errors. Small errors that don’t affect the qualitative results. Again, read what Hamilton has to say on the kerfluffle. The mistakes were simply not very significant.

    And BTW, I’m not even a fan of their basic model, I think they put way too much weight on financial crisis, and way too little on monetary contraction.

  26. Gravatar of W. Peden W. Peden
    26. May 2013 at 18:31

    Scott Sumner,

    I’ll check it out. I haven’t gone looking for info about this story; it just keeps popping up almost anywhere on the net when economic policy comes up. “Ed Balls has a bad idea? At least he wasn’t found out to be a dishonest FRAUD by a blind student at a community college!” etc. It’s got so tiresome that I suppose I’m going to actually have to check out some details to have something to say when asked about it, so thanks for the recommendation.

  27. Gravatar of Jeff Jeff
    26. May 2013 at 19:11

    Scott, happy to disagree. Maybe you have better insight into Rogoff’s motivation, but my reading is that there’s a lot of policy in there (and defense of the IMF as institution). And my reading of (e.g.) Paul Blustein’s book is that the Bank/Stiglitz came out a lot better than IMF/Treasury (on policy). As far as I can tell, you don’t disagree that the IMF has changed it’s mind on how it handled that crisis. And it’s softened(i.e. changed) a lot of it’s views since then (a process begun under Rogoff). One note — Stiglitz’s / the Bank’s criticism of high interest rates (in response, not as cause) were with respect to Thailand and South Korea — not Indonesia.

  28. Gravatar of Steve Steve
    26. May 2013 at 19:20

    Off-topic, but slightly relevant since we are talking about data errors in academic papers:

    Last week, two utilities companies, American Electric and NextEra, opened down about 60% before recovering a minute later. The NYSE decided to let the trades stand, as they were based on legitimate orders, but deleted them from the consolidated data feed, well, because they were unpleasant to look at.

    Keep that in mind when you are doing academic research based on whitewashed data feeds. For example, if you are trying to study the efficiency of the current stock market structure, and you rely on data from the Consolidated Tape Association, you are using fake data and will reach incorrect conclusions.

    “NYSE Lets Volatile Trades Stand But Cuts Them From Tape”

    “The NYSE has let stand all trades in AEP and NEE. But in an additional decision that is raising eyebrows, it has decided to remove all trades from the tape that were roughly three to four percent below the opening price.”

    “The trades stand. Even the ones for AEP at $22.28 and NEE at $30.37.

    OK, fair enough. They were legitimate orders, and the trades stand. Here’s something that bugs me: the NYSE also said that all trades in AEP at or below $46.03 between 09:30:00 a.m. and 09:31:00 a.m. and all trades in NEE at or below $76.19 between 09:30:00 a.m. and 09:31:00 a.m. will be marked with an Aberrant Report Indicator.

    What’s that? Let the NYSE explain: ‘The NYSE notes that executions at these prices are still valid trades, but they will be excluded from the high and low data disseminated by the Consolidated Tape Association.'”

  29. Gravatar of Jerry Brown Jerry Brown
    26. May 2013 at 20:00

    Ok- so you are interested mainly in attacking Krugman here, not defending Reinhart and Rogoff. That much is clear. When people like Matt Waters above show that maybe Krugman has made good points as far as his criticism of R and Rs methods you change the subject under discussion (he does it too mommy!)and throw in some personal off the wall observations about Krugman being an embarrassment to his friends and the “liberal movement”. Poor post.

  30. Gravatar of Scott Freeland Scott Freeland
    26. May 2013 at 21:10


    I’ve of two minds on this. One, the R-R paper in focus would ordinarily deserve little, if any attention. As far as I can tell, it does little or nothing to contribute to macroeconomic science. In practical terms, it may be hurting the reputation of the field for the less informed.

    Two, I think Rogoff and Reinhart deserve more respect as people than Krugman gave them. They wrote what is a dumb paper, with a “duh” conclusion that represents absolutely awful political and career judgement on their part, considering the timing. But, I’ve read some of Rogoff’s work in the past and once considered him a good economist.

    Hence, I wince when I read some of Krugman’s words about this paper, because I think the rest of the world was harsh enough already and a couple of what seem like decent people were already getting decimated for one bad paper.

    That being said, there is evidence of a hyper-concern about government debt in the open letter to Krugman. Krugman admits he made the same mistake when warning about higher interest rates when Bush and Congress ran up the debt in the 2000s, so he was not always immune.

  31. Gravatar of Vivian Darkbloom Vivian Darkbloom
    26. May 2013 at 23:22

    So, Krugman now responds with a blog post titled “It’s the Policy, Stupid”:

    “Since we’re probably going to have a bunch of stories about feuding economists and all that, just a reminder: it’s not about the people. It’s about the disastrous wrong turn policy took, all across the advanced world, in 2010. The economists matter only to the extent that they aided and abetted that wrong turn; their feelings (and mine!) matter not at all.”

    I would have thought a more apt title would have been “Let’s Change the Subject”.

    R&R’s open letter basically takes issue with Krugman for distorting the record with respect to how they’ve made data available and with what their stated views have been with respect to the proper prescription to the crisis. Rather civilly, on the policy issue, R&R have showed respect, albeit mild disagreement, for Krugman’s economic views and have indicated that time will tell who was right. Their objection was not so much about what the right policy was and should be, but what is the correct manner of debating what that policy should be.

    What bothers me greatly about Krugman (and DeLong) is that they seem to fully subscribe to their sense of moral self-superiority and because of that they believe that whatever means necessary are justified by their preferred ends. These means include, but are not limited to, personal slanders and factual misrepresentations. This latest “defense” is a perfect example of that mind-set. I say “moral’ because if it were strictly intellectual they would not have to resort to those means.

    Come to think of it, this mind-set seems quite prevalent in recent years–one is entitled to kill Americans without trial (or anything resembling that), target and strong arm political opponents through the heavy arm of government, monitor private communications and suggest prosecution against journalists for doing their jobs, etc, etc, and all this is justified by a subjectively perceived “greater good”. One would think that Mr. Krugman, ostensibly an academic, could further his policy goals without his slanders and distortions.

    Why do all these “good intentions” remind me of Hugo Chavez?

  32. Gravatar of Scott Freeland Scott Freeland
    27. May 2013 at 00:10

    Vivian Darkbloom,

    I’ve also considered the possibility that Rogoff and Reinhart are merely sacrificial lambs in Krugman’s drive to destroy the basis for austerity measures. If that is true, to the degree Krugman is successful and that austerity policies really are damaging(I think they are), perhaps this is justified on utilitarian grounds.

    But, it still doesn’t sit right with me, because as stupid as I think R’s and R’s concerns about the debt in the US, UK, and Japan are, they’re still on his side, ultimately, and are not evil people. They simply don’t deserve the mockery and scorn they’re receiving, to say nothing of any misrepresentations of their policy prescriptions.

  33. Gravatar of Ashok Rao Ashok Rao
    27. May 2013 at 00:19

    You said “Ashok, I’d prefer Richard Fisher to Summers, he’d be an unmitigated disaster.”

    Wow – that’s a strong statement. What exactly do you think Summers would do that’s so dangerous? It’s not like the FOMC will bow down to every whim.

  34. Gravatar of Bråk | Rättvist och balanserat Bråk | Rättvist och balanserat
    27. May 2013 at 01:52

    […] The Money Illusion har lite andra länkar, bland annat ett tidigare “öppet brev” till en annan väldigt Paul Krugmansk figur, nämligen Joe Stilitz. Läsvärt. […]

  35. Gravatar of Vivian Darkbloom Vivian Darkbloom
    27. May 2013 at 03:47

    Scott Freeman,

    “If that is true, to the degree Krugman is successful and that austerity policies really are damaging(I think they are), perhaps this is justified on utilitarian grounds.”

    That raises some interesting questions:

    1. Aside from the obvious question of what is “austerity”, is it true that R&R have favored current “austerity”? (As with “reality”, that term should always be placed in quotation marks). Is this, therefore, an accurate portrayal of the R&R versus Krugman *policy* debate?;

    2. Assuming that Krugman is “right” on the policy debate, is it necessary and/or justified (on “utilitarian” or other grounds) to constantly slander your opponents and intentionally misstate their views?;

    3. I apparently missed the column in which Krugman apologized for his take on the effect of Bush era budget policies on interest rates and inflation; however, in hindsight, was his likewise uncivil approach and liberal use of “facts” likewise justified on the utilitarian basis that he *might have been* correct? In this regard, this did not escape the attention of the then Public Editor of the NY, Daniel Okrent:

    4. Given the importance of the topics discussed here, am I allowed to be uncivil to you and misrepresent your views because of my firm belief that I am “right’? I would be interested to learn more about this “utilitarian” approach to public discourse and policy debate. I admit: I’m not an economist, so I’m probably not as I should be. Perhaps the concept only applies to economists or the sub-category of economists who have been awarded a Sveriges Riksbank Prize in Economic Sciences (even though that award was given for studies unrelated to the current debate)?

  36. Gravatar of Vivian Darkbloom Vivian Darkbloom
    27. May 2013 at 03:49

    “…so I’m probably not as well-informed as I should be.’

  37. Gravatar of Geoff Geoff
    27. May 2013 at 05:01

    Dr. Sumner:

    “…it’s tight money causing slow growth in developed economies, not “austerity.””

    I agree. Free market money, or, in other words, money produced in an open, unhampered market, has a supply of roughly zero. Free market money is extremely tight.

    Coercive state imposed tax-currency on the other hand, is extremely plentiful. There is more state tax-currency now than there has ever been at any time in history. It should not be surprising why today’s generation of individuals are not performing spectacularly well and why they are not generating double digit real growth and minimal unemployment.

    I think Dr. Sumner is exactly right. Money is indeed extremely tight all across the developed world. But this problem isn’t something any central bank can fix, for central banks don’t create free market money. They issue paper in an environment where the state forces taxes to be paid in it on income earned, thus squashing free market money. It would be proposing that Toyota produce more cars, because there is food scarcity.

  38. Gravatar of Saturos Saturos
    27. May 2013 at 05:31

    Scott – I think, (once again) you’re gunna have to do a response:

    And Nick Rowe too, ideally.

    Also, Ryan Avent and Matthew Klein have been slugging it out:

    HT to Noah Smith, but a heads up Scott, you probably don’t want to check his twitter feed right now, he’s beginning to sound a little unpleasant re you.

  39. Gravatar of ssumner ssumner
    27. May 2013 at 06:30

    W. Peden, I think it’s fair to say that Rogoff is more respected as a person (not economist) than Krugman, at least among economists that know both people. The idea that Rogoff is regarded as a fraud is actually laughable, and I suppose reflects the ignorance of the Krugman groupies.

    Jeff, I think you are entirely missing the point. Here’s Rogoff:

    “Let me make three substantive points. First, there are many ideas and lessons in your book with which we at the Fund would generally agree, though most of it is old hat. For example, we completely agree that there is a need for a dramatic change in how we handle situations where countries go bankrupt. IMF First Deputy Managing Director Anne Krueger””who you paint as a villainess for her 1980s efforts to promote trade liberalization in World Bank policy””has forcefully advocated a far reaching IMF proposal. At our Davos [World Economic Forum] panel in February you sharply criticized the whole idea. Here, however, you now want to take credit as having been the one to strongly advance it first. Your book is long on innuendo and short on footnotes. Can you document this particular claim?”

    He wrote the letter because he was annoyed by Stiglitz being a liar and a jerk. Yes, Rogoff defends some of the IMF policies and admits others were flawed. But I can’t see how anyone who read the letter could think it was motivated by disagreements over economic issues.

    As far as broke middle income countries running large deficits and financing them by printing money, how’d the Stiglitz recipe work out for Latin America in the 1970s and 1980s? How would the results in Thailand been different?

    Jerry, You said;

    “Ok- so you are interested mainly in attacking Krugman here, not defending Reinhart and Rogoff. That much is clear. When people like Matt Waters above show that maybe Krugman has made good points as far as his criticism of R and Rs methods you change the subject under discussion (he does it too mommy!)”

    Off course the post is about Krugman being a jerk. I don’t even agree with much of R&R!! Why would you expect me to write a post defending their ideas?

    Your other comments are simply factually inaccurate. I referred to Hamilton’s defense of R&R’s method, which as far as I know no one has refuted. Have you? And my “Krugman does it too” had nothing to do with with R&R’s “methods”. Next time read my comments more carefully.

    Scott, Almost every week Krugman uses the same sort of “dumb” data as R&R, posting graphs showing simple correlations between fiscal austerity and growth rates. It’s what macroeconomists do (for better or worse.) I’ve done similar things. i agree with your other points.

    Vivian, Finally someone who gets it. The dispute here is over tactics, not macroeconomic theory. I disagree with Krugman’s views on austerity, but on different grounds from R&R.

    Ashok, He’d have much more influence than Fisher, who they’d ignore.

    Saturos, Noah Smith? Tossing insults at conservative economists? Say it ain’t so.

  40. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    27. May 2013 at 06:41

    ‘…being a good liberal doesn’t require that you believe, or pretend to believe, lots of things that almost certainly aren’t true….’

    That assertion by Krugman has definitely been shown to be untrue by this debate.

  41. Gravatar of Jakob Jakob
    27. May 2013 at 06:42

    Hi Scott,
    Matt Yglesias just tweeted: “The first one in an argument to cry “civility” is losing the argument.” Tyler Cowen responded “I would sooner say the first one to go uncivil is losing the argument.”. I’m a big fan of both of them (and you) though I’m generally much more in agreement with Matt on policy. (Warning: Danish center-left hippie here). As I see it the problem is that we all have different perceptions of what constitute uncivil behaviour. Just as uncivil you and Tyler find Krugman to be, just as uncivil/disrespectful I (and I suspect Matt though of course i don’t know) find the attitude of wise centrist types who hide behind vagueness and try to short-circuit the debate by whining about “the tone in the debate”. This is an often used trick used here in Europe by political elites who don’t want to respond to substantial critique.

    Misrepresentation of claims and facts is of course another matter.

    Sorry for this inane meta-point, but I also wanted to ask you if you could comment on this article by Mark Dow:

    I have had a time time figuring out what this discussion about endogenous v. exogenous money is ACTUALLY about at its core. After I read Dow’s article I think I’m beginning to understand it. Would love to see a detailed response from you, if you have the time. Btw: is this “endogenous v. exogenous money” debate the same as what is sometimes called the “credit view vs. money view”?

    best regards!

  42. Gravatar of Ashok Rao Ashok Rao
    27. May 2013 at 06:45

    Scott you said “Ashok, He’d have much more influence than Fisher, who they’d ignore.”

    This is something Luce mentions (though in positive spirit, as “intellectual leadership”) and something I have a hard time believing. From my post:

    “”So clearly I think Summers is a gifted scholar. For one, it’s kind of funny Yellen’s experience in the central banking system is taken as a bygone conclusion, with far more emphasis on Summers’ “intellectual leadership”. The question is “to whom”. You take a few smart and relatively well-educated people. You put Larry Summers and Janet Yellen in a room with them. There’s probably a very good chance Summers would come out as the “more impressive” character.

    But you take two, highly-competent economists, and I’m willing to bet they’re equally confident in Yellen’s intellectual leadership. Now let’s actually talk policy, for a second. I won’t dwell on this because Yellen’s monetary credentials have been discussed in great depth for a while. She’s the rare Fed Official who actually seems to realize that inflation targeting is a disaster, and has endorsed a nominal spending target in all but name. (Christina Romer, my preferred option, has explicitly supported the same).””

    Now I think confidence in Fisher is probably a LOT weaker than Yellen/Romer (for good reason). But Larry Summers “impressiveness” can go how far in a room of dispassionate, ideologically-seated, monetary economists?

    Maybe I’m wrong. But I do have more confidence in such meetings than political debate clubs in the WhitE House.

  43. Gravatar of Ashok Rao Ashok Rao
    27. May 2013 at 07:07

    FWIW, I would add Barack Obama in the first group of “a few smart and relatively well-educated people.”

    Though I’d change smart to brilliant, and well-educated to highly-trained (you don’t have to agree with this policies to know that he has a sharp mind).

    There’s a certain mold of people – which includes almost every intelligent college graduate – for whom Larry Summers will be one of the most convincing voices.

    the FOMC is not one of those.

  44. Gravatar of Matt Waters Matt Waters
    27. May 2013 at 07:36


    Reading through Jim Hamilton’s posts does help me understand the average of averages methodology somewhat. But the methodology has a key flaw: when a country has more years at a certain debt level, then the average is closer to the “true” average. This is why I am dubious as far as counting New Zealand as heavily as other countries, because such an outlier likely had many idiosyncratic reasons which had nothing to do with debt.

    As far as the data’s availability, I’m still not sure whether RR ever had the whole methodology up on their website. I’m on my phone and so cannot check the spreadsheets, but the web archive likely does not have them archived in any case. But I believe the data was just data, and did not trace through all the steps to give the headline numbers. Krugman would have been better to say methodology rather than data, but the point seems to stand that the whole process was not made clear. The point also stands that RR was not exactly shouting from the rooftop that 90% is not some magical cliff. The medians of the debt buckets showed this to be the case, even in the original paper, but many pro-austerity types ran with the means.

    To the point about economics, indeed both parties in this debate are making terrible errors. Krugman’s error is the lack of monetary offset. The case against austerity is clearest in the EU, but even there the fiscal multiplier is zero if the ECB is only interested in inflation in Germany. Krugman might cheer a big fiscal stimulus in Germany, but that would only cause the ECB to tighten policy since if they didn’t tighten policy, the stimulus would make inflation go above the ECB’s target. The fiscal multiplier only exists for a few circumstances where money is absolutely fixed, such as the gold standard.

    However, this particular argument is not fiscal vs. monetary policy. Both sides seem to be operating under the view of the ZLB acting like an immutable gold standard. The difference is that Krugman is saying fiscal policy is needed under such a scenario, while RR seems to be saying that NEITHER fiscal nor monetary policy should be done. If the ZLB is acting like a gold standard, then Krugman is right: debt levels are not a chase of unemployment and we need fiscal stimulus. Since RR is generally assuming monetary policy is fixed like the gold standard, they are wrong. They’re basically saying a long, painful recovery is far better than increasing debt loads, if those were your only two options. But today’s unemployment really is far worse than somewhat higher debt.

    The fact that the monetary offset does exist makes the discussion somewhat mute. In fact, if we take RR only on fiscal policy, then it is better generally to do austerity than debt. But they seem to be arguing for both no fiscal stimulus and no monetary stimulus past the ZLB. If they are arguing for more monetary expansion, then, like Cosen, it’s only being done in the most muted and hushed terms.

    So, it’s not that Krugman is right. It that, like I said before, when RR are so wrong about so many things, I have a very hard time cheering them on like this post does.

  45. Gravatar of J J
    27. May 2013 at 09:04

    Ashok Rao,

    I would go with Yellen because she has all the right ideas and is already part of the system, unlike all the other top choices (although, at least Stanley Fischer has been the head of a central bank). We need someone to get started right away on better policy. She already knows who favors what on the FOMC.

  46. Gravatar of Matt Waters Matt Waters
    27. May 2013 at 09:21


    I saw the same post a few weeks ago. I’m a fan of Mark Dow and I just think his terms for “money” are somewhat confused with what people, including myself, generally think of money. I don’t have a real good understanding of all the different M’s, but I think he’s referring to M3 vs. M1, which we generally think of as money.

    For M3, anything that can be spent is considered money, ie anything with liquidity. Indeed, by that definition, the Fed controls very little of the monetary base directly. This has always been true due to lending out deposits which amplify the amount of money available for Americans. Even moreso, though, in the past few decades with the shadow banking system and repo market. In a typical repo transaction, a pension find buys a Treasury from a bank and the bank promises to buy it back, but the pension fund can use that promise like a bank deposit. Same with money market funds. This is at least my understanding.

    When you get into the weeds like this, it shows that focussing on either M or V in isolation is somewhat a sideshow. M is generally been considered literal cash and Fed deposits, but ingenious banks have also allowed short-term bonds to be used like money as well. This increases velocity if M remains only cash and Fed deposits. Indeed that’s why the balance sheet of the Fed actually shrunk from 1981 to 2006.

    It also shows how wrong-headed the thinking that the Fed is somehow manipulating prices to be different from their fundamentals is. Fed action DOES change prices, but by changing the fundamentals and therefore the prices in an efficient market. The Fed does not change prices by skewing prices against fundamentals, because he market has the capability of arbitraging the difference.

    Well, that’s not perfectly true because the EMH does not always work, but to a first approximation it’s true. Constraints do matter in many short-term cases, but if there’s a big opportunity markets can and will fight central banks, such as when Soros shorted the Pound which was fundamentally overvalued for the ERM.

  47. Gravatar of Full Employment Hawk Full Employment Hawk
    27. May 2013 at 09:23

    With admireres like Warsh, what does Krugman need enemies for? Krugman had commented very favorably on THIS TIME IS DIFFERENT and its findings had influenced his view that recessions caused by financial crises were especially difficult to recover from.

    If R&R’s claim that they had made the database public is correct, Krugman owes them an apology for that. But that does not change the validy of Krutman’s criticism of the R&R paper. The proposition that there is a discontinuity at 90% after which further increases in the debt GDP ratio causes a major increase in the negative effect of long-run growth has been discredited. And with the corrected figurs, the negative correlation between the debt/GDP ratio and long term growth is so small that EVEN IF the causality does run from the ratio to growth, the effect of failing to reduce the deficit now on long term growth is so small that contractionary fiscal policy when the economy is depressed is difficult to justify on that basis. And in may cases the causality appears to not run from the ratio to growth, but either in the other direction or both are caused by some third factor. R&R did nothing to correct the claims by conservatives that the article demonstrates that if we did not have austerity immediatly the deficit would have a strong negative impact on growth. As a matter of fact what they said at certain points appeared to support it. R&R played a major role in giving intellectual support to the austerity lunacy which is playing an important role in keeping advanced economies depressed, along with insufficiently expansionary monetary policy, of course.

    Economies do not have to be in a full liquidity trap, which the U.S. economy definitely is not in, in order for contractionary fiscal policy to slow or stop the growth in output. When very short-term interest rates have reached the zero floor monetary policy becomes more difficult and uncertain. If the central bank is unwilling and/or unable to provide enough monetary stimulus to make NGDP grow at an acceptable rate, and that is what is currently happening, contractionary fiscal policy has a strong contractionary effect. (Such a situation needs a term to describe it, like a “Partial Liquidity Trap”) R&R share the blame for justifying such contractionary fiscal policy and deserve the criticism to which they have been subjected by Krugman and others.

  48. Gravatar of Saturos Saturos
    27. May 2013 at 09:28

    Adam Gurri writes a piece taking aim at Scott’s accolades:

  49. Gravatar of ezra abrams ezra abrams
    27. May 2013 at 10:00

    ssummer – your replyto froisson is exaclty the sort of snotty ness that rogoff decries in krug…

    instead of being sarcastic, which , imo, just makes you looks stupid, why don’t you try and be scholarly, and provide and *exact* ref

    imo, as a phd, a url is NOT, rpeat NOT a scholarly ref; on large page, you need to give a pointer (the worst example is ecnomists who cite “BLS web site” as a source; totally unacceptable behaviour, whether it is for an undergrad, grad, or full tenured prof.

    shame on you for lowering the tone

  50. Gravatar of ssumner ssumner
    27. May 2013 at 10:33

    Jakob, I just skimmed it, but it doesn’t seem interesting to me. What part did you like?

    Ashok, Obama seems very bright, but certainly not about monetary policy.

    Matt, The issue is not whether the average of averages is the optimal approach, the issue is whether it is defensible. And the answer is clearly “yes,” which is why Rogoff’s critics are going way overboard. There’s no “fraud” here.

    And R&R are certainly not “austerians,” not even close. So I strongly disagree with your assertion on that point.

    And It makes no sense to claim that they are required to put their entire methodology on the internet, I don’t even put my data on the internet–they’ve already done more than many authors.

    FEH, I disagree with your claims about R&R and would refer you to Hamilton’s excellent posts on why the criticism was off base.

    Saturos, I tried to leave the following comment, but it didn’t take:

    “Good post–especially the part about my influence being overrated. But don’t forget that pragmatists still need a target.”

    ezra, OK, I apologize for being rude to foosion. I think I may have misread his first comment. I get worn down by the constant insults and stupidity in this comment section. See my reply to Matt about the data.

  51. Gravatar of Ashok Rao Ashok Rao
    27. May 2013 at 10:39

    “Ashok, Obama seems very bright, but certainly not about monetary policy.”

    Well , I suppose it’s a testament of your confidence in Summers’ brilliance (though, not policy, I’m guessing) if you think he can somehow convince the FOMC into “unmitigated disaster”.

  52. Gravatar of Matt Waters Matt Waters
    27. May 2013 at 14:55

    Reinhart’s testimony in 2010 certainly looks very austerian for a non-austerian. Reading it in full stands in stark contrast with all the hedging done about this paper now. She made it clear that:

    – There is a large cliff at 90% debt/GDP. She say that medians are about a percentage point while the mean “is far lower.”
    – She specifically says thresholds, in other words that there is a magical cliff.
    – Without outright saying so, it’s clear she is giving only theories where debt causes growth and not the other way around or a third cause. She said she “presumes” that causality runs this way. There is no mention of any other possibility of cause of the correlation.
    – Oddly enough, her first theory is that high interest costs make the country tighten fiscal policy. This makes absolutely no sense. As far as I know, most everyone agrees that if short-term rates are not zero, then the central bank has room to act. So for interest costs to be an issue, it means that the CB is not at the ZLB. How then does debt cause low growth for low-NGDP growth reasons? Even they should say the CB is not pushing on a string in the case of non-zero rates.
    – The second theory is far more plausible: that interest costs force taxes to go up and thereby create more distortion in markets. But how are those taxes somehow more distortionary than taxes that would have paid for the spending in lieu of debt? Tax distortions are an argument against government spending no matter the funding, but it’s framed as if the only funding that matters is debt.
    – Not a single word mentions monetary policy. Their WSJ editorial after the HAP paper didn’t mention monetary policy either and this letter only mentioned it in one sentence, arguing that Germany would force tighter policy if Italy engaged in fiscal stimulus. The emphasis is always overwhelmingly about fiscal policy.
    – They may not be austerians in the sense that they always oppose fiscal stimulus, but hanging their hat on this paper as well “this time is different” means that they hold strongly that a recovery from a financial crisis MUST be long, slow and painful. Fiscal stimulus helps a little bit in their view, but the costs of having high debt are too big to have a fiscal stimulus that could actually work given no monetary policy.

    My issue is that this stuff really matters and almost everyone involved in the economic debate except you and Krugman do not understand the grave consequences of economics being wrong concerning unemployment. Like I said, when Cowan and many other economists do support expanded monetary policy, it’s only done in the most hushed and muted tones. But then when some argument comes out that may, perhaps, show that some sort of libertarian ideal of tight money is appropriate, it’s quickly linked as excellent by Cowen and Mankiw. The best example of this was Rajun’s report. The arguments for tight money are then shown as false, but there’s never any support for looser monetary policy without hedging what’s said a million ways.

    R&R’s arguments are even far worse than that, because they say over and over again that there is no way out of a long, slow, and painful recovery for “systemic” financial crises. And long means LONG, including the Great Depression and Japan’s lost decade. The fact that R&R did not commit some sort of fraud or dishonesty does not assuage me concerning utter callousness about being so dead wrong on so many things. Again, this stuff really does matter, but one really just does not get any sense of the gravity of the situation from the VSP’s, and that’s utterly shameful.

  53. Gravatar of Full Employment Hawk Full Employment Hawk
    27. May 2013 at 18:36

    “Obama seems very bright, but certainly not about monetary policy.”

    Agreed. Obama should have quickly filled the vacancies on the BOG with people who were prepared to take the FED’s mandate to seek maxium employment seriously. And reappointing Bernanke was a mistake. Until late last year, he was the Hamlet of monetary policy who refused to take the bold action that was needed. (Even Krugman made the mistake of supporting this reappointment. [I also made this mistake.] But the Obama people were in a position to thoroughly question him about what he intended to do before reappointing him and were in a position to determine that he was not prepared to act decisively.)

    But I think he has also not been very bright about fiscal policy. His statement after the original stimulus passed that he was satisfied with the size of it instead of trying to get a bigger one and being blocked by Republican obstructionism deprived him of the opportunity to credibly blame the fact that the unemployment rate was still above 9% at the time of the 2010 election on Republican obstructionism. And then he doubled down on the mistake in 2010 by switching the emphasis of his adminitration’s fiscal policy from unemployment reduction to deficit reduction. This played a major role in getting us into our current deficit obsession and thereby creating a situation where expansionary monetary policy is being fought by very contractionary fiscal policy, especially when one includes the state and local governments. What we currently have is the equivalent of a car driver pressing on both the gas and the brake at the same time. The expansionary monetary policy has caused the economy to keep growing, but the contractionary fiscal policy has caused the growth to be too slow to bring the unemployment rate down at an acceptable rate.

    When the economy is faced with a depression level shock and monetary policy becomes more difficult and uncertain, we need expansionary monetary AND fiscal policy reinforcing each other.

  54. Gravatar of Full Employment Hawk Full Employment Hawk
    27. May 2013 at 18:40

    “The issue is not whether the average of averages is the optimal approach, the issue is whether it is defensible.” Averaging together data for one year and data for a number of years and giving them equal weight is very difficult to defend.

  55. Gravatar of JSeydl JSeydl
    27. May 2013 at 22:27

    That open letter to Stiglitz is pretty brutal. However, I wonder if Rogoff’s position may have changed in light of the economic meltdown of 2008 – which, as we all know, was due in part to the Greenspan-Rubin-Summers conscious effort to overvalue the dollar, often relying on institutions like the IMF to accomplish their agenda.

  56. Gravatar of ssumner ssumner
    28. May 2013 at 05:17

    Matt, The real issue here is Rogoff–he’s the one with the big reputation.

    FEH, Not if the multiple years in one country are strongly serially correlated. Read Hamilton’s arguments.

    JSeydl, I don’t follow, the dollar wasn’t very strong in 2008, except late in the year. But what impact did Rubin have on that policy? And how does the IMF affect the value of the dollar?

  57. Gravatar of ssumner ssumner
    28. May 2013 at 05:18

    Matt, I’d add that all the quotations they provide toward the end of their letter convinced me that there views are far more nuanced than Krugman suggests.

  58. Gravatar of Dave Dave
    28. May 2013 at 10:18

    I think Robert Waldman does a pretty fair analysis of the R&R letter here :

  59. Gravatar of JSeydl JSeydl
    28. May 2013 at 13:15


    The dollar has been overvalued since 1997. A rich country like the US is supposed to be running trade surpluses with the developing world. I know you don’t like reasoning about currency values by looking at trade flows, but I do. And so do many other important economists, like Dean Baker:

    If the dollar were to fall enough, then the trade deficit would close. It’s that simple.

    The IMF affects the value of the dollar when it imposes harsh austerity and Washington-Concensus policies on developing Asian economics, which in turn forces them to accumulate massive dollar reserves to avoid IMF involvement in the future. This was the story post-1997.

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