Tag Archives: by Paul Krugman

The Economics of Stagflation, Part III, by Paul Krugman, 31-08-2025

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Stagflation policy dilemmas and why Fed independence is critical

Item: On Aug. 28 Chris Waller, a member of the Federal Reserve’s Board of Governors — and rumored to be in the running for the Fed’s next chair — gave a speech warning about economic weakness:

Returning to the labor market, risks are continuing to build. In my July 17 speech, I said that private-sector job creation was nearing stall speed, and the data received since then have put an exclamation point on this statement.

Clearly, it’s time to cut interest rates, to get ahead of the looming slowdown!

Item: On the same day, the Wall Street Journal reported strong indications that inflation is about to accelerate:

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Talking With Hélène Rey, The international role of the dollar and more, by Paul Krugman, 8/8/25

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Paul Krugman in Conversation with Hélène Rey

My old teacher Charlie Kindleberger used to tell his students that anyone who spends too much time thinking about international money goes mad. It’s a subtle topic, one in which it’s all too easy to mistake mysticism for wisdom.

Fortunately that hasn’t happened (yet?) to Hélène Rey of the London Business School, one of my go-to economists on the international role of the dollar, exorbitant privilege, financial cycles and more. We talked Thursday about these subjects, with some inevitable discussion of current events. Transcript follows.

Paul Krugman: Hi everyone, Paul Krugman again. I am speaking this week with Hélène Rey who is one of the world’s leading experts on international macro and money, and especially on international roles of currencies. So we want to talk a lot about that. But first, hi, Hélène.

Hélène Rey: Hi Paul, delighted to be on again and to talk to you.

Krugman: Yeah. So there’s been a bit of news this past week. As you know, the Trump tariffs have come into full force supposedly. Before we get into sort of the more analytical economic stuff, sitting on your side of the Atlantic, what do things look like to you?

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The Emperor’s New Trade Deal, by Paul Krugman, 7/8/2025

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Tariffs are bad. A deluded president is worse

On Tuesday Donald Trump went on CNBC to explain why the European Union is facing a tariff of “only” 15 percent. But what he said was simply delusional — and the delusion should be even more concerning than the tariffs.

The Europeans, Trump asserted, had agreed to cough up $600 billion, which he described as a “gift,” not a loan. And he emphasized that this is “$600 billion to invest in anything I want. Anything. I can do anything I want with it.”

So Trump apparently believes that the European Union has agreed to provide him with a personal $600 billion slush fund.

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The Economics of Immigration and Deportation, by Paul Krugman, Jul 20, 2025

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The Trump administration is going after immigrants, and not just those in the country illegally. Trump is seeking to expel immigrants who have been in the United States for decades. His Justice Department says that it is prioritizing “denaturalization,” stripping immigrant citizens of their citizenship. ICE is clearly engaged in racial profiling, as legal residents and citizens have been arrested and detained in ICE raids based on their “physical appearance.”

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The Coming Health Care Apocalypse, by Paul Krugman, 27 Jun 2025 | One chart on the Big Ugly Bill | O apocalipse iminente da saúde !

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Still worn out from travel, so today’s post will basically consist of a single chart trying to illustrate the sheer ugliness of the One Big Beautiful Bill Act, in a way that I hope cuts through the blizzard of numbers and projections out there.

I hope most people following policy at all — which unfortunately misses a substantial part of the electorate — know that soon, maybe within a few days, Republicans appear highly likely to pass legislation that combines big tax cuts for the rich with savage cuts to programs that help lower-income Americans, including Medicaid and SNAP (food stamps). Loss of health insurance coverage won’t be the only source of mass misery from this legislation, but it’s the biggest and easiest to illustrate.

So let’s review what happened over the past 15 years. The Affordable Care Act, aka Obamacare, was enacted in 2010 but only went into full effect in 2014. It fell short of achieving universal health care, especially because many red states refused to expand Medicaid even when the federal government offered to pay for it. It is also somewhat complicated, because of the compromises made to limit disruption of the existing system.

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MAGA Will Devastate Rural America | Trump’s policies will hit the American heartland hard, very hard, by Paul Krugman, jun 23-2025

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Everyone is talking, understandably, about Iran. But the rest of Donald Trump’s policy agenda continues to goose-step on. Radical changes in social spending, immigration policy and tariffs — changes that will hurt tens of millions of Americans — are either about to start or are already happening.

And one point I haven’t seen emphasized much is that while the human damage from these policies will be very widespread, it will be especially severe in rural areas and small towns — the very areas that overwhelmingly supported Trump in 2024.

The first thing you need to understand is that while rural Americans like to think of themselves as self-reliant, the fact is that poorer, more rural states are in effect heavily subsidized by richer states like Massachusetts and New Jersey.

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Bad Times for College Graduates | Where have all the jobs gone, and why does it matter?, by Paul Krugman, Jun 19-2025

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There are so many bad things happening right now, from wars to the looming loss of health insurance for millions of Americans, that the plight of recent college graduates unable to find jobs may not seem like that big a deal. But it’s unusual: Highly educated Americans normally have considerably lower unemployment than the average worker. And it also suggests that something is happening under the surface of an economy that by many of the usual measures still looks pretty good.

So let me take a break from my usual concerns to talk about what may be going on for graduates and what it might mean for the future.

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Nobody expected the MAGA Inquisition, but it’s here, and will destroy American science, by Paul Krugman, 9 Jun 2025

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The trial of Galileo

It was obvious, if you thought about it, that the second Trump administration would be hostile to science and intellectual endeavor in general.

After all, look at some key elements of the MAGA coalition. Fossil fuel interests don’t want anyone studying climate change. Conspiracy theorists like Alex Jones make much of their money selling quack medical remedies, which makes them hostile to conventional medicine. (And partisan orientation became a key factor determining whether people were willing to be vaccinated against Covid.) Practitioners of voodoo economics don’t want anyone looking into the actual results of cutting taxes on the rich. Nativists proclaiming an immigrant crime wave don’t want anyone examining who commits violent crimes. And so on.

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A Real Liberation Day, a message from a saner nation, by Paul Krugman, Apr 25

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Finished today’s travel and arrived to find the locals setting up to celebrate Liberation Day. In a saner nation than mine, that means the day they overthrew fascism, not the day they imposed crazy tariffs.

I first visited Portugal almost 50 years ago, working at the Banco de Portugal for three months. Back then many people wondered whether their two-year-old democracy would survive. It has. And these days I, like millions of others, wonder whether democracy will survive in America.

Cronyism, Capitulation and Utter Chaos, by Paul Krugman, Apr 23

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And what the hell was Scott Bessent doing briefing Morgan clients?

Hitting the road today, but I have time for a note on the news that moved markets yesterday. Bloomberg reports:

US Treasury Secretary Scott Bessent told a closed-door investor summit Tuesday that the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate.

That de-escalation will come in the very near future, Bessent said during an event hosted by J.P. Morgan Chase in Washington, which wasn’t open to the public or media. He characterized the current situation as essentially a trade embargo, according to people who attended the session.

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Nathan Tankus, Part II, Liquidity, volatility and market craziness, by Paul Krugman, Apr 19, 2025

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Nathan Tankus has become an essential resource during these strange and scary times. My last chat with Nathan was about DOGE’s depredations at government agencies. This time I spoke with him about disruptions in financial markets.

I continue to be astonished at how important the “plumbing” of these markets — the stuff that makes them function, which we normally don’t even notice — becomes when everything falls apart. And economists in general don’t know that much about the plumbing, so we need help from people like Nathan who do.

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