Sumner: Austerity Isn't Hurting Britain Because Expected Inflation Has Risen

     Sumner, not for the first time, insist that Britain is not being hurt by austerity.

     http://diaryofarepublicanhater.blogspot.com/2013/03/sumner-declaring-supply-side-victory-in.html

     http://diaryofarepublicanhater.blogspot.com/2013/02/sumner-britain-has-job-growth-miracle.html

     He also is claiming again that Britain is doing well on the jobs front even if they have gone through a double dip. 

     " I see that Paul Krugman is still insisting that Britain’s problems are due to fiscal “austerity,” which would only make sense if they were stuck in a liquidity trap and the BoE was no longer able to hit its nominal targets (whether inflation or NGDP.)"

     "Even worse, he’s still using RGDP data even though NGDP is the appropriate way to ascertain the level of demand.  RGDP inappropriately mixes supply-side and demand-side issues. Employment in Britain is hitting record highs (unlike the US, where employment is mired far below the peak under Obama’s policies) suggesting that some of the low RGDP reflects supply-side problems."

   "Meanwhile, Mark Carney seems to have successfully talked the pound lower, and inflation expectations are soaring.

The U.K. 10-year break-even rate, a gauge of inflation expectations, climbed to the most since September 2008.

The rate, which measures the difference in yield between index-linked and nominal securities, rose six basis points to 3.35 percent at 12:43 p.m. London time.

     "For fiscal “austerity” to be a problem you’d somehow have to believe that it’s preventing the BoE from achieving even higher expected inflation rates.  How plausible does that sound?"

      http://www.themoneyillusion.com/?p=19992&cpage=1#comment-233791

     How plausible does it sound though that expected inflation is the only metric to gauge whether austerity is working? While Sumner may think NGDP is a better rubric than RGDP Krugman has never agreed with him
on this that I'm aware.

     The story of Britian might seem to argue against Sumner's preference of NGDP as in Britain's case we see negative RGDP and rising inflation. It certainly seems to show that at the very least higher inflation or higher inflation expectations is no panacea.

     I'm also not sure what Sumner is referring to in claiming that Britain is 'hitting record highs in employment.' In the link above of Sumner on what he calls Britain's "jobs miracle" the country had seen more jobs than expected in the last quarter. However, this hasn't really brought down the unemployment rate that I'm aware of. Their unemployment rate is about 7.8%-same as ours.