Sumner and Krugman: Frenemies Forever?

     In a recent post I suggested that Sumner is Krugman's real enemy. 

     http://diaryofarepublicanhater.blogspot.com/2013/05/is-sumner-krugmans-real-enemy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

     In the comments section, Tom Brown argues that they actually agree on a lot. Yes and no. Certainly they largely agree on conservatives who have worried about the advent of "galloping inflation' because of the expansion of the Fed's balance sheet. 

    http://www.themoneyillusion.com/?p=21472#comments

    I imagine that Krugman would totally agree with that, though I notice also what Sumner didn't say: that interest rates also failed to spike as that throws cold water on the Austerians. Even here, though, the matters more complicated as while he didn't discuss this falsified claim in this post he always says that low interest rates are the sign of tight money. 

    I'm a little reluctant to jump into this 'we're all together here' moment for Keynesians and MMers. The big reason is really Sumner's attitude. To be sure, fellow MMer David Glasner today said-as Tom alerted me to-that Krugman and the MMers have some wide agreement. This was in the comments section to be sure. 

    "I am not authorized to speak on behalf of MM. But there is a lot in common between what Abe said he would do and what MMs have been advocating. Come to think of it, there is a lot of common ground between what MMs and Krugman have been advocating."

     http://uneasymoney.com/2013/05/30/is-japan-a-currency-manipulator/#comment-19501

     My main trouble with this is Sumner. He certainly does everything he can to ferment differences between the two side, specifically with his dogmatic insistence of monetary offset and a zero fiscal multiplier. 

     http://diaryofarepublicanhater.blogspot.com/2013/05/sumner-continuing-to-push-monetary.html

     I mean if there's little difference between Keynesians and MMers why has Sumner been writing so much stuff like this lately?

     "I think the recent jobs numbers are a huge embarrassment to Keynesians.  If we’d gotten 50,000 jobs a month for the first 4 months, they’d be crowing that their model is vindicated.  So what’s the criterion for testing it?  Are we to assume that favorable data can prove Keynesianism and discredit other models, but unfavorable data is inconclusive?  That’s a recipe for never rejecting Keynesianism.  Which is exactly the point I guess."

     http://diaryofarepublicanhater.blogspot.com/2013/05/sumners-continues-to-spike-ball-on.html

     Here Sumner tries to draw a parallel between conservatives predicting galloping inflation and Keynesians calling for fiscal stimulus-or even the end of the sequester. 

     "From today’s news:

The marked improvement in the labor market since the U.S. central bank began its third round of quantitative easing, or QE3, has added an edge to calls by some policy hawks to dial down the stimulus. The roughly 50 percent jump in monthly job creation since the program began has even won renewed support from centrists, raising at least some chance the Fed could ratchet back its buying as early as next month.

    

     "I hope I don’t have to do any more of these.  The fiscal multiplier theory is as dead as John Cleese’s parrot.  The growth in jobs didn’t slow with fiscal austerity, it sped up!  And the Fed is saying that any job improvement due to fiscal stimulus will be offset with tighter money.  They talk like the multiplier is zero, and their actions produce a zero multiplier.  Has there ever been a more decisive refutation of a major economic theory?"

     "Yes there has; the conservative view that QE and big deficits would lead to higher inflation and higher interest rates."

     http://www.themoneyillusion.com/?paged=5

     After reading this explain to me how we're to conclude that We're all in this together? Again, another case as Sumner showing who he considers his enemy to be:

     "I get a lot of criticism from both liberals and conservatives.  The right complains I’m an inflationist, even though I’m actually an inflation hawk.  The left complains about my seemingly irrational crusade against fiscal stimulus.  ”After all they are our allies, and doesn’t every bit help?  Surely you don’t think Mr. Bernanke would sabotage additional fiscal stimulus, after all, he is asking for it.”

     "That’s what they say.  And my response is yes I do think the Fed would sabotage additional stimulus, and so does the press:

Concerns that the U.S. Federal Reserve could start unwinding its massive monetary stimulus program later this year sent equity markets into a tailspin last week, with the heightened volatility extending into a new week as Asian markets opened lower on Monday. . . .

So the fact that the outlook for the global economy is better than it was six months, albeit not stellar, means the outlook for equities overall remains positive, analysts said.

In fact, it’s some signs of improvement in the U.S. economy and recent comments from Fed officials that have sparked talk of an early end to quantitative easing.

    "Despite the current round of austerity, growth this year (partly due to QE3) is so strong that the Fed is considering tightening monetary policy.  Now let me emphasize that I don’t think growth is very strong this year, and I oppose tightening monetary policy.  But it doesn’t matter what I think, and I’m not even sure it matters what Bernanke thinks.  It matters what the Fed thinks.  And if they are strongly considering tightening monetary policy under current conditions, just imagine what they’d be doing if Congress was actually doing fiscal stimulus right now!"

     http://www.themoneyillusion.com/?paged=3

     I think the truth is that Sumner really is the true heir to his hero, Milton Friedman. Freimdan's program often didn't look very different from the Keynesians, yet in reality he was not buddies with Keynesains but Hayek, Reagan, and Thatcher. 

        I read Sumner and am happy to learn from him. But that doesn't mean I'm going to call him an ally too readily. He is very smart, no doubt, as was Friedman. At the end of the day he's making a case for fiscal austerity with monetary offset theory.  Judging by what the OECD recently said in a report, it's working. 

       "This is from OECD’s Economic Outlook report published earlier today:

In the euro area, the area-wide fiscal consolidation (measured as an improvement in the underlying primary budget balance) of just over 4% of GDP between 2009 and 2013 was similar to that in the United States over the same period. This casts doubts about the role of fiscal tightening in explaining the comparatively weak performance of the euro area.

      http://diaryofarepublicanhater.blogspot.com/2013/05/is-sumner-krugmans-real-enemy.html

      If we're all friends he sure doesn't sound like it. As I see it, his game is pretty clear: discredit the idea of fiscal stimulus.