Paul Krugman is depressing today:
So, terrible growth prospects; low inflation; oh, and low interest rates, with no sign of the bond vigilantes. Ordinary macroeconomic analysis tells you very clearly what we should be doing: fiscal expansion and monetary expansion by any means we can manage; in fact, the case for a higher inflation target pops right out of just about any model capable of producing the kind of mess we’re in.
And what are we talking about in policy terms? Spending cuts and an end to monetary expansion.
I know the arguments — fear of invisible bond vigilantes, fear that 70s-style stagflation is just around the corner despite the absence of any evidence to that effect. But why do such arguments have so much traction, while everything economists have spent the last three generations learning is brushed aside?
One answer is that macroeconomics is hard; the idea that if families are tightening their belts, the government should do the same, is as deeply intuitive as it is deeply wrong.
But the susceptibility of politicians — including, alas, the president — and pundits to these wrong ideas demands a deeper explanation.
Mike Konczal ratchets up my rentier argument, arguing that what we’re seeing is
a wide refocusing of the mechanisms of our society towards the crucial obsession of oligarchs: wealth and income defense.