In “Trade Deficits: These Times are Different”, Paul Krugman concludes:
But we are living in a world where, for the time being — and maybe for a long time to come, if secular stagnation theorists are right — mercantilism makes a fair bit of sense.
Oh my! PK must think that having a NP gives him a ‘license to kill”.
Fortunately, secular stagnation theorists seem to be wrong. Furthermore, appeals to liquidity traps is not convincing, As the charts show, World Trade Blues reflect a languishing global economy, i.e. weak global aggregate demand!
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I may be misunderstanding you, or Krugman, or probably both of you, but isn’t Krugman also saying weak Aggregate Demand is the problem. He just wants to call the cause of low demand “Secular Stagnation”. And he is less optimistic about monetary policy correcting it.
And I can’t figure out what “NP” means. Maybe that is why I’m not understanding?
Nobel Prize?
Yeah, Nobel Prize! For, low AD is insoluble, unless a lot of fiscal stimulus is taken up. And that´s because you are in a “liquidity trap”.
I really have to believe that insufficient AD is much easier to solve than insufficient AS problems. No matter what the interest rate is. It should be a better problem to have.
That´s right, because AD problems tend to be “self-inflicted” (by the monetary authority). AS problems usually have a stuctural cause.
Can you show those NGDP charts on a per capita basis?
Bill, I only did it for the US. The pattern is exactly the same.
Please don’t abbreviate Liquidity Trap as LT.
Level Targeting is far more important. ☕
Liquidity Trap is illusion and super bad idea. It should be vanished.
Well,because of outnumbers, still useful for “LT stupid”?
You´re right!