Speaking of Krugman

A very short and succinct blog from Paul Krugman, clarifying what I was trying to convey yesterday.

It’s the stupidity economy

”The first-best answer — that is, the answer that economic models, like my old Japan’s trap analysis, suggest would be optimal — would be to credibly commit to higher inflation, so as to reduce real interest rates.“

”The second-best answer would be a really big fiscal expansion, sufficient to mostly close the output gap. “

”That’s why, at this point, I’m turning to what I understand perfectly well to be a third-best solution: subsidizing jobs and promoting work-sharing. “

Read the blog to fill in the gaps.

Don Brown
November 14, 2009