0

Deploying Germany's Debt Capacity for European Recovery

Paul Krugman is annoyed by the hippie-punching at the start of Ken Rogoff's Project Syndicate column, in which Ken lands blows on Paul "Groovy Beads, Man!" Krugman and Martin "Flower Power" Wolf.

Me? I think that you are ahead as long as Ken does not consign you to the Gamma Quadrant. Some of us have the gift of prophecy and prophesy. Others have the gift of speaking in tongues and do so speak. Still others have the gift of communicating with Very Serious People and do so by punching hippies. As St. Paul said, so many gifts…

"Europe's Keynesian Problem": Brad DeLong tries to find nice things to say about Ken Rogoff’s latest. But he tries too hard. Rogoff’s piece is structured as an argument against Those Who — those who believe that Europe’s problems result solely from excessive austerity, and would all be solved with a bit of Keynesianism. It might help if he would name names; otherwise people might imagine that he’s talking about, say, Martin Wolf or me.... The Keynesian argument... has been that this inherently difficult situation is made worse by two aspects of fiscal policy. One is the extreme austerity being imposed on the periphery.... The other is that on any kind of rational pan-European basis, we should be seeing austerity in the periphery at least partly offset by stimulus in the core... looser fiscal policy would directly help... exports, and it would also help promote, yes, somewhat higher German inflation, helping achieve internal devaluation.... [Instead, he] insinuate[s]... a reduction in austerity would achieve nothing at all. This is not a helpful contribution.

I think that there is a genuine and important analytic point at issue here.