A Benjamin Cole post
The acerbic, brilliant Nobel Prize-winner Paul Krugman is too Keynesian for me, but give credit when credit is due. The Phillips Curve is alive and well, except that it has become the Phillips Phlat-line, as Krugman recently illustrated in his blog.
Krugman produced this chart, which is good:
But better still is this chart by Tim Duy:
Krugman put some fancy regression co-efficients on his chart, but I say eyeballing is better—this is macroeconomics after all, and pretensions to exactitude are folly.
It sure looks to me like the Phillips Phlat-Line is alive and well, meaning the Fed has a lot of room for additional monetary stimulus. You have to boost unemployment by 5 pp to get a 1 pp cut in inflation rates. Who likes that deal (besides Charles Plosser and Richard Fisher)?
In English: Gun the money press, dudes.
That is, if we can bear 2% inflation and prosperity.