"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen


"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister


"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont


"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister


"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Friday, January 16, 2015

Swiss, Baker versus Krugman

I think Dean Baker is wrong.

Paul Krugman and the Swiss Movement

Friday, 16 January 2015 06:01

It isn't often that I think Paul Krugman gets one wrong, but I think he wrongly attacks those chocolate loving cuckoo clock making Swiss in his column today. His complaint is that the Swiss central bank abandoned its commitment to keep down the value of the Swiss franc against the euro. Krugman sees this a failure of will, with the central bank giving up a commitment to pursue an inflationary policy. This is part of a larger saga of feckless central banks that continue to obsess about inflation when the real problem facing world economies is an inflation rate that is too low.

While the general point is right, it is hard to see how this story applies to Switzerland. Switzerland did not see the same sort of downturn as the rest of the OECD in 2008. Furthermore, it has fully recovered from its downturn with a GDP that is 8 percent above its pre-recession level and an unemployment rate of 3.5 percent.

In this context, it is actually doing what we should want Switzerland to do as a good world citizen. By allowing its currency to rise, it will make its goods and services less competitive internationally. This means it will import more from its trading partners and export less, effectively providing them with an economic boost. This is what we should want to see. The countries that are at or near full employment should be running larger trade deficits or smaller surpluses.

So give the Swiss a gold star. They called this one right. (Now if we can get them to talk to China ....)

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