The Krugster writes:
This is still true in much of economics, I believe. But in the areas that matter most given the state of the world, it’s not true at all. People who declared back in 2009 that Keynesianism was nonsense and that monetary expansion would inevitably cause runaway inflation are still saying exactly the same thing after six years of quiescent inflation and overwhelming evidence that austerity affects economies exactly the way Keynesians said it would.
Technically, he was right about the lack of inflation, but his prediction was hardly unique. I have been saying the same thing since 2011, for example. I and a few others bloggers were correct that TARP and record deficits would not cause high inflation. (Inflation as measured by treasury yields and CPI. Inflation can exist in other sources such as stock prices, gas, food, real estate, rent, insurance, textbooks, tuition, daycare and healthcare. This is called bifurcated inflation, which we have written about in the past.)
But the stimulus failed to create enough jobs or boost economic growth, in agreement with the many experts who predicted in 2009 that the stimulus would fail to meet the lofty expectations delineated by the stimulus’ biggest cheerleaders, Paul Krugman and Robert Reich. Krugman and the rest of the left is disingenuously taking credit for the post-2008 economic boom when, in fact fed policy, free markets, the consumer, the Bush Tax cuts, TARP, technology, and web 2.0 – not stimulus spending – are the reasons why the US economy has done so well.
The Krugster was wrong that the sequester would push the economy into a double dip recession. The exact opposite happened: stocks and GDP surged, much to the dismay of the left, who want to believe the growth of the economy is dependent on more entitlement spending.
From the WSJ: An Autopsy for the Keynesians
Keynesians told us that once interest rates got stuck at or near zero, economies would fall into a deflationary spiral. Deflation would lower demand, causing more deflation, and so on. It never happened. Zero interest rates and low inflation turn out to be quite a stable state, even in Japan. Yes, Japan is growing more slowly than one might wish, but with 3.5% unemployment and no deflationary spiral, it’s hard to blame slow growth on lack of “demand.”
Since 2008 we have the web 2.0 boom, Bay Area real estate boom, IQ being more important than ever, Silicon Valley being the center of the universe, Ivy League being inundated with applications, huge purchases of real estate by foreigners, stocks always going up, Apple being worth $700 billion, Snapchat worth $30 billion, Uber $100 billion, Facebook $300 billion, record high exports, and record high consumer spending and profits & earnings. Although the bond market alludes to deflation and stagnation, US economic activity, wealth creation and innovation is anything but. At 2-4% YOY, GDP growth has returned to the levels last seen during the late 90′s, and no one was complaining about slow growth back then. Treasury yields and inflation are low thanks to the Greater Moderation, QE, and huge demand for low yielding US debt due to the flight to safety – not because of economic weakness. The libs want to believe the economy is weak because they hate American exceptionalism and have no faith in the smart people who make the US economy the great success that it is – or – they want to spread lies about the economy being weak in order to push their destructive economic agendas as the ‘solution’ to fix this imagined weakness.