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Lecture 1: The sum of all fears Paul Krugman
Lecture 1: The sum of all fears
Paul Krugman
From Eichengreen and O’Rourke
From Eichengreen and O’Rourke
This wasn’t supposed to be possible:
“The central problem of depression-preventionhas been solved, for all practical purposes.”
Robert Lucas, 2003
And many people said things that look stupidin retrospect …
“If you want a simple model for predicting theunemployment rate in the United States overthe next few years, here it is: It will be whatGreenspan wants it to be, plus or minus a randomerror reflecting the fact that he is not quite God. ”
Paul Krugman, 1997
This is not a supply shock …
14.8
14.9
15
15.1
15.2
15.3
15.4
-2
-1
0
1
2
3
4
5
6
7
8
9
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
Inflation
Interest rate
Real GDP per capita
Japan’s lost decade
Source: IMF WEO database
Source: Census, Federal Reserve
80
100
120
140
160
180
2001
99
7
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Japanese money and prices
Monetary base
GDP deflator
Source: Bank of Japan, IMF
0
50
100
150
200
250
300
1929 1931 1933 1935 1937 1939
Prices
Base
M2
Money and prices in the Great Depression
Source: BEA, Historical Statistics of the United States, St. Louis Fed
0
200
400
600
800
1000
1200
2007I 2007II 2007III 2007IV 2008I 2008II 2008III 2008IV 2009I
Net federal borrowing (annual rate)
Source: Brad Setser
The Fed steps out
Source: Federal Reserve/James Hamilton
