After Draghi (Wonkish)

@John Huppenthal Sure, if you value growth at the cost of everything else. How much has that growth in the US has actually had an impact on the lower/middle class?

@Hector The EU is not pro-austerity, it is limited to trade, consumer protection and environmental legislation. Austerity was a national affair, arguably in the UK more than in the other 27. Germany was talking austerity rather than doing it.

@Doug Rife -- I was annoyed at the inconsistency of the colors of the lines...

@Doug Rife Maybe there is a bottom line to all of this: U.S. Median Household income, 2018 $63,400 Eurozone Countries, Median Household income, $39,600 I can understand that these countries exemplify the high tax, welfare state policies promoted by the NYTimes but at some point maybe we should have an acknowledgement that when you give people things for free that they would otherwise have to work for, they work less. And, when you have oppressive taxation of small businesses you have less job growth. And, when you tax "carbon" oppressively, it has an impact.

@John Huppenthal to what degree does the higher US median salary reflect the uber rich vs the poor in the USA? I moved to Switzerland - not EU, I realize, but it's nice to be in a place without dozens of homeless on the streets, where the disparity between rich and poor is not as dramatic as the USA. It is noticeably better for most people vs the USA where it is better for the few.

@Montreal Moe "...Africa continue to make life easier...for its citizens..." Maybe it depends on what measure you use to determine an easier life. In 2018, the countries of Subsaharan Africa had a GDP per capita of less than $1,800. Lower than it was in constant dollar terms five years ago. U.S. gdp per capita was $62,600 in 2018, up 5% from five years ago .

@Doug Rife Thanks, I don't know how to address a population which can,t utilize a paper and pencil to draw up a shopping list and can't estimate what a hundred dollar shopping cart without the computer scanning all the bar codes. It is a strange world for this old codger when in times gone by the money you put in the bank enhanced your wealth when you left it alone rather than disappeared. A 10% growth of a 20K Dow is 10 times larger than a 10% growth of a 2K Dow. It is magic that two thousand and twenty thousand can so distort our understanding of the facts. I remember 19% and how fast the cost of house doubled. With the cost of money approaching zero capitalism seems ready to join communism on the trash heap of history.

@Carl that is not much of a "long history" when you site one opinion from 2012 We feel Krugman has been correct most of the time since 2000. Who in your opinion has had more success on economic predictions in the US and world-wide?

@Carl Dr Krugman is famous for candidly admitting his mistakes/bad calls. I find it refreshing.

@Carl The alternative to leaving the Euro was selling all of their real estate to Chinese investors wanting residential rights to the EU.

@Fredggg Maybe the entire monetary hypothesis needs to be reexamined. Milton Friedman won his Nobel prize by hypothesizing that the Fed could have rescued the U.S. from the Great Depression by forcing the money supply to increase instead of allowing it to fall. An explicit corollary of that theory was his magical belief that the velocity of money would have been positively correlated with that increase in money supply. Turns out to have been a horrible error. We ran the Friedman playbook to the nth degree in this Great Recession. We have more money relative to our economy than ever before in history, $750 per $1,000 of GDP as compared to $550 per $1,000 in 1984 when GDP growth was 7.4%. What happened? Turns out that money velocity dropped like a bomb as they pumped out trillions of dollars. Bottomed out at 1.3, a new all-time low. Previous low was 1.7 in 1964. All that pumping out money did in the 21st century was to drive gold from $425 to $1,800 allowing speculators in this and other stagnant investments to walk away with over $8 trillion that would have otherwise been invested in dynamic business investment, business investment that would have created the productivity necessary for wages to increase.

@Montreal Moe The value of a currency is usually considered relative to other currencies. So, the euro is undervalued relative to, say, the very strong US dollar. A currency can also become undervalued if a government simply prints too much money and floods markets with it. There are other causes as well, such as trade imbalances.

@Paul Holtz Thank you . Since the US dollar is the world's reserve currency isn't an overvalued US currency the source of the problem. Only the US treasury can fix the problem by printing much more money to reflect its real value? It seems to me that just like everything else we have more money than we have demand and that is why there are the trade imbalances. It makes no sense that I can't afford to cross border shop with an undervalued Canadian dollar. Surely governments need to set the value of their currency in accord with the needs of their citizens. Our economy is booming with a dollar worth 75 cents US would that indicate equilibrium not overvalue or undervalue? My dollars are just right for here in Quebec but I can't afford to buy American your dollars are too expensive.

@Montreal Moe You need to investigate something economists call purchasing power parity. Under or over valued depends on the purchasing power of a US dollar in the US as compared to say Canada. If the US dollars can purchase more in Canada than the US (adjusting for various factors) the US dollar would be overvalued. Also governments do not set exchange rates for most currencies. These are set by traders buying and selling trillions of dollars of currencies every day. Governments can try to influence exchange rates, but they do not set them.

@Art Seaman Sadly many people who live in Europe don't see what you have seen, especially in the UK. It is essential for nations to co-operate and peoples to be happier with their neighbours (which is practically everyone in a global society) - otherwise the problems of climate change, environmental degradation and a 10B+ human population will overwhelm modern society.

@tbgb303 The UK is an outlier in the EU. They wished it to be as such. They did their utter best to defeat, or at least get a “free ticket out” to any and all rules that the EU implemented to help fighting poverty and such in the UK. Added to that, Westminster -and the press- successfully imprinted in larges swathes of the popolation that the EU was to blame for what was, basically, tory nastieness. ( say the Bedroom Tax) The whole ‘Austerity’ thing, was a tory construct.

@kbaa "...a sovereign nation that cannot control its interest rates is not a sovereign nation." A central bank may be able to set the interest on loans to member banks, but interest on gov't. and corporate bonds, home mortgages, and consumer credit are set by the market, with daily, sometimes hourly, fluctuations.

@james jordan Of course it makes no sense to compete when the global economy has really done a great job of raising everybody's floor. I sometimes wonder if we need to compete even as it will destroy us. At the meeting of Arctic nation only the USA contests Canada's sovereignty over the Northwest Passage. Does Pompeo expect Canada to re-establish our sovereignty anywhere in our country? I don't know how long it would take America to take control militarily but I suspect it could destroy us economically in less than an hour.

@chris:"his consuming hatred of those who disagree with his Progressive politics " You want to see hatred? Ask him and the NYT why they allow racially segregation in their public school system. You'll also see a lot of verbal gymnastics on the part of the liberals on this board.

@chris "consuming hatred"?? I have been following Krugman since around 2000 and nothing he has written displays "hatred". Hatred seems to me to be the language of the Republicans (especially on Fox news) and then they turn around and acuse liberals of the same. Trump is great at this tactic.

@Jp Please explain how Krugman and the NYT would be responsible for any racial segregation in the public school system?

@GLO "The Northern European Economies...will continue to do well." Maybe it depends on how you define "...do well..." In 2018, the Nordic Countries: Denmark, Finland, Iceland, Norway, and Sweden, grew at less than 2% in real dollar terms. Less than $60 billion. By comparison, the U.S. grew $680 billion real, 3.2%.

@John Huppenthal To compare GDP without change of debt is a useless exercise. In 2018 the US "growth" was 680 (3.2%) with an increase of debt by 1150 billion USD. Now get the Euro zone data, you may learn a something.

@Jack F In full agreement. Brexit is bound to create increased transaction cost between Britain & the rest of the world because Brexit means falling back@ least temporarily to a system of no trade agreements while they r being rebuilt again & that’s likely to take time. The work of Nobel Laureates Ronald Coarse & Doug North was based upon respectively the idea that transaction cost r important function of productivity (Coarse) - the lower the transaction cost, the higher the number of transactions the higher the production (& vice versa) - & (North) transaction costs could be reduced by new structures or organizational arrangements (trade agreements & tariff unions etc). Brexit will cause transaction cost to go up between Britain & the world. Therefor the volume of transactions will go down, therefore demand will go down by a margin that is a function of the size of the British economy ($3 trillion - less some %, I assume less than 10% but I have no idea, maybe real economist do but for guess work here lets just say 10% or $300 billion or $4500 per UK head). Since profit & viability is made only @ the margins, it could create a dip big enough to create a recession due to decreased demand: 10% in Britain but much smaller on the continent (a $20trillion econ), so $300 billion drop in demand/transactions or reduction of 1.5% in Europe. All back of the envelope speculation. It will create a dip of 10% in UK, 1.5% in Europe & perhaps < 1% globally but all @ the margins, so ouch.

@wayne mueller Well they need new organizational arrangements to reduce the negative affect of the Germany economy upon rim economies - like xfer payments or something. It needs to become more democratic. Maybe it needs a floating point system of integration hinged upon local level of development. Romania shouldn’t have full integration because their people would flood into Western European societies and the local economy would labor under the comparatively high value of the Euro. So there needs to be a cascading level or path of integration. They are working on something like that but I forgot what they call it.

@Germany, and the EU in general needs to do more to defend itself. Russia is not the only threat in this world. Being a humanitarian "superpower" is a lot easier when the US military is at your back. Germany, for better or worse, still pretty much prescribes for the EU and the smaller states and economies either go along or get crushed. That's not to say that emulating German discipline, thrift and hard work would not benefit perpetual basket cases like Greece, but Germany still looks out for Germany uber alles while looking like the benevolent big brother to the EU.

@BRYAN HERRIN Sure.. if it weren’t for the UK constantly stifling and vetoing an EU army... The UK is deadly afraid of an EU army where the Germans -logically, dur to their size- would be the biggest part. Trump blabbered about the EU ‘not pulling its weight’ and Merkel & co were already hammering-out the shape an EU-army would take. The smaller countries already work together towards an integrated army. Dutch armoured divisions already work with German tanks and their crews. Watch what happens when the UK is finally out.

@BRYAN HERRIN "Germany, and the EU in general needs to do more to defend itself. Russia is not the only threat in this world. " That is fact free nonsense. Compare Russian defence (70 billion USD = 200 USD PPP) with the defence spendings of the EU members. Spending more would be stupid, ánd Russia is indeed the only threat that counts. But you do not have to die stupid. :-) https://defense-and-freedom.blogspot.com/2019/04/fair-burden-sharing-in-nato.html

@Stephen Merritt Absolutely right. The depressing thing about Europe is the German determination to prevent the sort of measures which worked after 2008 ever being used again.

@Anthony I wonder if this is more like comparing two coaches (the Fed and Draghi) by controlling for the difference in player skill. The EU is doing worse than the US in an absolute sense, but seeing this analysis one might conclude that it’s more due to working age population (player skill) than a difference in monetary policy (coaching skill).

@E Thank you for this interpretation. I was having trouble seeing what Krugman was up to with that paragraph. Your explanation makes sense.

@Anthony Looking at working age population can also be seen as a proxy for population growth. If the working age population is growing by 1% a year, it's likely that the overall population is also growing by that amount. If the US has a population growth of 1% a year and Europe has no population growth, than US GDP growth will need to be one percent higher than Europe's if per capita GDP growth is to be the same.

@AlanM For Draghi, an Italian , to have any chance to be named head of the European Central Bank, he had to officially adhere to German orthodoxy. After a Frenchman, the Germans were intent on having a German named head of the ECB.

@hen3ry You wrote "As long as we continue to cater to corporations when it comes outsourcing, their refusal to pay for experience, and the transient nature of many jobs, and their bottom line as they take from communities, Americans will suffer. " We continue to outsource jobs to twenty million foreign nationals here illegally. We continue to outsource manufacturing jobs to China. And those lost jobs aren't $100,000 STEM jobs, they are blue collar jobs. They are jobs that used to go to young citizens starting out their work life. Those millions of foreign nationals, here illegally, drive down the wages of blue collar citizens that still have jobs. Bring back tariffs, seal the borders, deport the usurpers and then watch the good times roll. Till then, we have to listen to the left talk out both sides of their mouths - endorsing and sheltering illegal immigration and then decrying the low rate of wage growth for US citizens and expounding endlessly on inequality. Illegal immigration is to Democrats as climate change is to Republicans.

@AmarilloMike I haven't seen or heard the Democrats endorsing illegal immigrants or illegal immigration. Besides, most illegal immigrants are doing jobs Americans aren't doing. Those are the jobs at the bottom of the income ladder. Illegal immigration is the least of our worries. In fact, asking for asylum is not illegal. The Democrats and the GOP cater to the richest individuals, families and corporations in America. Whatever they want they get. If it hurts us, too bad. Tariffs and sealing the borders won't solve the fundamental problem. It's money and how it's being used to corrupt the electoral process and the process of making and passing laws and regulations. With our most polluting industries saying that any regulation is bad and our lawmakers going along, it's a wonder we still have a country worth inhabiting. I could continue but I won't. Economic security should be a top priority for each party. We are not outsourcing to 20 million illegal immigrants. Most of them don't have the requisite skills because the countries they came from are in poverty and they have had to struggle to survive. Economic security is important but the two parties don't want that. Why? Because more of us might notice their hypocrisy.

@hen3ry Americans will do those jobss if you pay them enough. If you import labor you drive down labor costs. It’s simple supply and demand econ. The AMA is perhaps the best union in the states. They keep doctors pay high. How? By restricting the number of people who can become doctors. Allow all med doctors to freely immigrate and doctors pay will drop down to migrant farm worker pay.