Memo to economists: SHOW YOUR WORK
I know Krugman is famous for his acerbic writing style, because he has the New York Times bully pulpit, etc. But I read him religiously because he show his work. He explains why he thinks what he thinks. Recent example:
Germany in effect has an undervalued currency relative to what it would have without the euro. The figure shows German prices (GDP deflator) relative to Spain (which I take to represent Southern Europe in general) since the euro was created. There was a large real depreciation during the euro’s good years, when Spain had massive capital inflows and an inflationary boom. This has only been partly reversed, despite an incredible depression in Spain. Why? Because wages are downward sticky, and Germany has refused to support the kind of monetary and fiscal stimulus that would raise overall euro area inflation, which remains stuck at far too low a level.
So the euro system has kept Germany undervalued, on a sustained basis, against its neighbors.
For me these tend to be one-sided conversations because hardly anyone else does this, relying instead on argument from authority.
Paul is good. Be more like Paul, everybody.