Is Sumner Krugman's Real Enemy?

     I think so. There is now some pretty bullish predictions among economists This is a great thing. Let's hope they are right.

    "Times have changed since 2010. Barring a fresh crisis — and there are certainly a few that could arise — many economists expect growth to return to a fairly healthy level by next year as house prices and the stock market continue to rise and the jobless rate falls closer to its historic average of 5.8 percent."

     Read more: http://www.politico.com/story/2013/05/2014-election-economy-92053.html#ixzz2UsrHGgKG

    Indeed, if things do go this way we'll finally be able to feel like we're in a recovery. This is obviously great news if it turns out to be true. However, the question will be if we get to these levels next year or even in the next few years, what have we learned?

    One thing surely we've learned now is that in a dramatic rise in the monetary base by itself is not at all inflationary. Also during a recession there's little risk of 'discipline by bond vigilantes' provided the country in question has its own printing press as the U.S., Britain, Japan, and most noneuro countries do. 

   We've also learned of course that the EU's structure is a disaster and in the future they will need to either become more politically and fiscally integrated or less dissolve in the future. Certainly the idea of stimulative austerity has been defeated and Reinhart and Rogoff have egg on their faces for hyping up a coming debt bomb and 90% debt as some kind of hobgoblin. Now they're pretending that they never hyped this up.They certainly fooled Tom Coburn. 

    http://diaryofarepublicanhater.blogspot.com/2013/05/krugman-doesnt-worry-over-krugman.html

     However, it seems to me, that Sumner is working very hard on being the one who nailed this recession. I'm not saying he's right, in fact I disagree with him. However, he has always been in a war that Krugman didn't know he was waging. 

     Those who argue for austerity will claim Sumner's monetary offset theory. Austerity is fine as long as the Fed properly offsets it. Judging by comments from the OECD, it seems that Sumner's getting some traction:

       "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/the-general-casuistry-of-markets.html

     So what this means for economic theory will be interesting. Of course, let's hope we won't have to test  what we've learned from an crisis on the level of 2008 again any time soon. Meanwhile these numbers should help the Democrats next year.

     The 2014 midterm election is shaping up as something the United States has not seen in nearly a decade: a campaign run in a strengthening economy with deficits on the decline.

No one is popping champagne corks yet, and risks remain. But the altered terrain, if it holds, could benefit Democrats and challenge Republicans whose rise to power in the House in 2010 came via a tea party movement that blasted President Barack Obama and his party for ignoring a stagnant economy and piling up an endless run of trillion dollar deficits.

    Read more: http://www.politico.com/story/2013/05/2014-election-economy-92053.html#ixzz2UsyN3O7F

     So it's take the good-Democrats being helped-with the bad-Sumner declaring victory. Still Krugman should probably be more proactive in discussing Market Monetarism. It seems to me this is where the wrong lessons could be learned.