About That Japan Deal: Arithmetic has a well-known globalist bias - PAUL KRUGMAN (Substack)

 About That Japan Deal

Arithmetic has a well-known globalist bias

PAUL KRUGMAN

JUL 23, 2025

So the Trump administration has triumphantly announced a trade deal with Japan, and I guess I should post something about it, even though my regular morning post — on a completely different topic — is already up.

There are three main things you should take away from this deal:

1. It will increase, not reduce, the U.S. trade deficit

2. It will accelerate America’s descent into crony capitalism

3. U.S. consumers are still facing a major price shock

The deal, as reported, involves imposing a tariff of “only” 15 percent on imports from Japan, mainly in return for a promise by the Japanese government to invest $550 billion in the United States. It appears that Japan will create a sovereign wealth fund for that purpose, and that Trump will have a say in how it invests.

So, first, the impact on the trade deficit. As I and others have repeatedly pointed out, there’s some basic arithmetic linking international investment and the trade balance. A few technical details aside,

U.S. trade deficit = Net foreign investment in the United States

This isn’t a theory, it’s just accounting. So if the deal leads to more investment in the U.S., it must, necessarily, lead to a bigger trade deficit.

How, exactly, would that work? The most likely channel is that capital inflow from Japan will lead to a stronger dollar than we would have had otherwise, making U.S. goods less competitive across the board.

It has been clear for a while that Trump and co. don’t understand or believe in balance of payments accounting, that they want both a smaller trade deficit and more foreign investment in America. Now their basic lack of understanding is embodied in a specific deal.

Second, as I said, it appears that Trump will get to influence how Japan invests. We’re already well on the way toward an economy in which success in business depends not on how good your product is but on your political influence (and also an economy in which Trump tells Coca-Cola what ingredients it should use.) This is another step on that road.

Finally, a 15 percent tariff is still really, really high — much higher than the 1.6 percent tariff Japanese non-agricultural exports faced before Trump began his trade war.

Will Japanese exporters, rather than U.S. consumers, end up paying that tariff? Some people have looked at the relatively muted effect of tariffs on consumer prices so far and suggested that maybe Trump was right about that. But they’re looking at the wrong data.

If foreigners were eating the tariffs, we’d expect to see a large decline in the prices America is paying for imports. And the BLS does, in fact, measure import prices; its index specifically does not include tariffs.

So let’s compare the increase in average tariffs from a year ago with the change in nonfuel import prices:

Source: Yale Budget Lab, Bureau of Labor Statistics

Have import prices fallen by enough to offset the tariff hikes? No, they’ve gone up slightly.

So why aren’t we seeing big increases in consumer prices yet? Basically because for the moment U.S. businesses are absorbing much of the cost rather than passing it on to consumers. They’ve been able to do that partly because many companies rushed to bring imports in before the tariffs hit, and are still selling out of that inventory. They’ve been willing to do that because they don’t want to alienate customers and lose market share, and have been hoping that the tariffs will mostly go away.

But if Japan still faces a 15 percent tariff after making a deal, that hope will soon fade. Winter Inflation is coming.

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Has Brazil Invented the Future of Money? - Paul Krugman (Substack)

Has Brazil Invented the Future of Money?

 Paul Krugman

Sunstack, July 22, 2025

Last week the House passed the GENIUS Act, which will boost the growth of stablecoins, thereby paving the way for future scams and financial crises. On Thursday the House also passed a bill that would bar the Federal Reserve from creating a central bank digital currency (CBDC), or even studying the idea.
Why are Republicans so terrified by the idea of a CBDC that they’re literally ordering the Fed to stop even thinking about it?
In 2022 the Fed issued a preliminary report on the possibility of creating a CBDC, which it described as “analogous to a digital form of paper money.” Currently, Americans are able to hold and spend one form of Federal Reserve liability: green pieces of paper bearing pictures of dead presidents. A CBDC would expand that right, allowing us to hold and spend deposits at the Fed, which, like all deposits these days, would just be digital records.
If this sounds outlandish, you should realize that we already have what amounts to central bank digital currency — but only for financial institutions. Banks maintain accounts at the Fed and can transfer funds to each other via an electronic payments system. Why shouldn’t comparable facilities be made available to individuals and nonfinancial companies?
Republicans say that they’re worried about invasion of privacy, that a CBDC would open the door to widespread government surveillance. But remember, these are the people who have handed over personal Medicaid data to ICE to facilitate arrests and abductions. If you think they’re deeply concerned about potential surveillance, I have some Trump family memecoins you might want to buy.
I’d also point out that the government can access private bank records under certain circumstances and certainly has the technological ability to watch every financial move you make. The only thing that keeps it from doing so is the law, specifically the Right to Financial Privacy Act. If we ever do create a CBDC, it will surely involve comparable privacy protection. Either you trust in rule of law or you don’t.
What Republicans are really afraid of, with good reason, is the likelihood that many people would prefer a CBDC to private bank accounts, especially but not only stablecoins. And in general any attempt to create a full-fledged CBDC would run into fierce opposition from the financial industry.
But what about the possibility of creating a partial CBDC? Could we retain private bank accounts but provide an efficient, publicly-run system for making payments out of those accounts?
Yes, we could. We know this because Brazil has already done it.
Most people probably don’t think of Brazil as a leader in financial innovation. But Brazil’s political economy is clearly very different from ours — for example, they actually put former presidents who try to overturn elections on trial. And the interest groups whose power, for now at least, makes a U.S. digital currency impossible appear to have much less sway there. Brazil is, in fact, planning to create a CBDC. As a first step, back in 2020 it introduced Pix, a digital payment system run by the central bank.
As I understand it, Pix is sort of like a publicly run version of Zelle, the payment system operated by a consortium of U.S. private banks. But Pix is much easier to use. And while Zelle is big, Pix has become simply huge, used by a reported 93 percent of Brazilian adults. It appears to be rapidly displacing both cash and cards:

	Source: The Economist And why not? According to an IMF report, · Pix transactions take place almost instantaneously. A Pix payment settles in 3 seconds on average versus 2 days for debit cards and 28 days for credit cards. and · Transaction costs are low. The authorities have set a requirement on Pix to be free for individuals, and the cost of a payment transaction for firms/merchants is only 0.33 percent of the transaction amount, versus 1.13 percent for debit cards and 2.34 percent for credit cards. I can’t help noticing that Pix is actually achieving what cryptocurrency boosters claimed, falsely, to be able to deliver through the blockchain — low transaction costs and financial inclusion. Compare the 93 percent of Brazilians using Pix to the 2 percent, that’s right, 2 percent of Americans who used cryptocurrency to buy something or make a payment in 2024. Oh, and using Pix doesn’t create an incentive to kidnap people and torture them until they give up their crypto keys. So, will we get a Pix-type system in the United States? No. Or at least not for a long time, for two reasons. First, the U.S. financial industry just has too much power, and would never allow a public system to compete with its products — even, or actually especially, if the public system is superior. In fact, the Trump administration suggests that Pix’s mere existence in Brazil constitutes unfair competition for U.S. credit and debit card companies. Second, the U.S. right is firmly committed to the view that the government is always the problem, never the solution. Republicans will never, ever admit that a government-operated payments system might be better than private-sector alternatives. Other nations may well learn from Brazil’s success in developing a digital payment system. But America will probably remain trapped by a combination of vested interests and crypto fantasies.

The American Way of Economic War - Paul Krugman (Foreign Affairs)

 The American Way of Economic War

Is Washington Overusing Its Most Powerful Weapons?

By Paul Krugman

Foreign Affairs, January/February 2024 Published on December 6, 2023

 

Suppose that a company in Peru wants to do business with a company in Malaysia. It should not be hard for the firms to make a deal. Sending money across national borders is generally straightforward, and so is the international transfer of large quantities of data.

But there’s a catch: whether or not the companies realize it, their transactions of both financial information and data will almost certainly be indirect and will probably pass through the United States or institutions over which the U.S. government has substantial control. When they do, Washington will have the power to monitor the exchange and, if desired, stop it in its tracks—to stop, in other words, the Peruvian company and the Malaysian company from doing business with each other. In fact, the United States could prevent many Peruvian and Malaysian companies from trading goods in general, largely cutting the countries off from the international economy.

Part of what undergirds this power is well known: much of the world’s trade is conducted in dollars. The dollar is one of the few currencies that almost all major banks will accept, and certainly the most widely used one. As a result, the dollar is the currency that many companies must use if they want to do international business. There is no real market in which the Peruvian company could exchange Peruvian soles for Malaysian ringgit, so local banks facilitating that trade will normally use soles to buy U.S. dollars and then use dollars to buy ringgit. To do so, however, the banks must have access to the U.S. financial system and must follow rules laid out by Washington. But there is another, lesser-known reason why the United States commands overwhelming economic power. Most of the world’s fiber-optic cables, which carry data and messages around the planet, travel through the United States. And where these cables make U.S. landfall, Washington can and does monitor their traffic—basically making a record of every data packet that allows the National Security Agency to see the data. The United States can therefore easily spy on what almost every business, and every other country, is doing. It can determine when its competitors are threatening its interests and issue meaningful sanctions in response.

Washington’s spying and sanctioning is the subject of Underground Empire: How America Weaponized the World Economy, by Henry Farrell and Abraham Newman. This revelatory book explains how Washington came to command such awesome power and the many ways it deploys this authority. Farrell and Newman detail how September 11 pushed the United States to begin using its empire and how its many constituent parts have come together to constrain both China and Russia. They show that although other states may not like Washington’s networks, escaping them is extremely difficult.

The authors also demonstrate how, in the name of security, the United States has created a system that is often abused. “To protect America, Washington has slowly but surely turned thriving economic networks into tools of domination,” Farrell and Newman write. And as their book makes clear, the United States’ efforts to dominate can cause tremendous damage. If Washington deploys its tools too often, it might prompt other countries to break up the current international order. The United States could push China to cut itself off from much of the world economy, slowing global growth. And Washington might use its authority to punish states and people that have done nothing wrong. Experts must therefore think about how to best constrain—if not quite contain—the United States’ empire.

DATA AND DOLLARS

The United States’ centrality in global finance and data transmission is not entirely unprecedented. The world’s leading power has always had outsize control over the world’s economy and communication networks. At the beginning of the twentieth century, for example, the British pound played a key role in many international transactions, and a plurality of all global submarine telegraph cables passed through London.

But 2023 is not 1901. Today’s era is defined by what some economists call “hyperglobalization.” The world is far more intertwined than it was a century ago. It is not just that global trade now makes up a larger share of economic activity than in the past; it is also that the complexity of international transactions is far greater than ever before. And the fact that so many of these transactions pass through banks and cables that the United States controls gives Washington powers that no government in history has possessed.

Many lay observers, and quite a few professional commentators, imagine that this dominance affords the United States great economic advantages. But economists who have done the math generally do not believe that the dollar’s special position makes more than a marginal contribution to the United States’ real income—the amount of money Americans make after adjusting for inflation. There do not appear to be any studies of the economic benefits that come from hosting fiber-optic cables, but those benefits, too, are likely to be small (especially because many of the profits that come from transporting data are probably booked in Ireland or other tax havens). But Farrell and Newman show that U.S. control of the world economy’s chokepoints does give Washington new ways to project political influence—and that it has seized on them.

The United States began capitalizing on these powers, the authors argue, after the 9/11 attacks in 2001. Before, American officials had been inhibited in exercising U.S. economic might by fears of overreach. But officials quickly realized they could have been following Osama bin Laden’s financial transactions in a way that would have revealed the terrorist’s plans and that they could have used their financial influence to disrupt al Qaeda’s operations. And so, after the terrorist group struck, Washington put its concerns aside. It expanded both its financial surveillance and its use of sanctions.

 

John Lee

 

For policymakers, exercising these powers proved easy. The dollars used in international transactions are not bundles of cash but bank deposits, and almost every bank that keeps such deposits must have a foot in the U.S. financial system in case it needs access to the Federal Reserve. As a result, banks around the world try to stay in the good graces of U.S. officials, lest Washington decide to cut them off. The story of Carrie Lam, the China-appointed former chief executive of Hong Kong, provides a case in point. As Farrell and Newman write, after the United States sanctioned Lam for human rights violations, she was unable to get a bank account anywhere, even at a Chinese bank. Instead, she had to be paid in cash, keeping piles of money at her official residence.

A less picturesque—but far more consequential—example of U.S. power is the way Washington co-opted the Society for Worldwide Interbank Financial Telecommunication, better known as SWIFT. The organization serves as the messaging system through which major international financial transactions are made. Notably, it is based in Belgium, not the United States. But because so many of the institutions behind it rely on U.S. government goodwill, it began sharing much of its data with the United States after the 9/11 attacks, providing a Rosetta stone that Washington could use to track financial transactions worldwide. In 2012, the U.S. government was able to use SWIFT and its own financial power to effectively cut Iran out of the world financial system, and to brutal effect. After the sanctions, Iran’s economy stagnated, and inflation in the country reached roughly 40 percent. Eventually, Tehran agreed to cut back its nuclear programs in exchange for relief. (In 2018, U.S. President Donald Trump scuttled the deal, but that’s another story.)

That is the kind of power the United States gets from its control over financial chokepoints. But as Farrell and Newman show, what the United States can do with its control over data chokepoints is arguably more remarkable. At many, or perhaps all, of the places where fiber-optic cables enter American territory, the U.S. government has installed “splitters”: prisms that divide the beams of light carrying information into two streams. One stream goes on to the intended recipients, but the other goes to the National Security Administration, which then uses high-powered computation to analyze the data. As a result, the United States can monitor almost all international communication. Santa may not know whether you’ve been bad or good, but the NSA probably does.

Other countries, of course, can and do spy on the United States. China, in particular, works hard to intercept advanced American technology. But no one does spying better than Washington, and despite Beijing’s best efforts, China has not been able to steal enough secrets to match U.S. prowess. As Farrell and Newman point out, the United States still dominates crucial intellectual property—not so much the software that runs current semiconductor chips, but the software used to design complex new semiconductors, which is still an essential market. “U.S. intellectual property,” the authors declare, winds “through the entire semiconductor production chain, like a fisherman’s longline with barbed and baited hooks.”

ALL THAT POWER

There are many illustrative examples of Washington weaponizing its underground empire, including the sanctioning of both Lam and Iran. But the one that may best show how all three elements of the empire—control over dollars, control over information, and control of intellectual property—come together is the astonishingly successful takedown of the Chinese company Huawei.

Just a few years ago, American officials and foreign policy elites were in a panic about Huawei. The company, which has close ties to the Chinese government, seemed poised to supply 5G equipment to much of the planet, and U.S. officials worried this spread would effectively give China the power to eavesdrop on the rest of the world—just as the United States has done.

So Washington used its interlocking empire to cut Huawei off at the knees. First, according to Farrell and Newman, the United States learned that Huawei had been dealing surreptitiously with Iran—and therefore violating U.S. sanctions. Then, it was able to use its special access to information on international bank data to produce evidence that the company and its chief financial officer, Meng Wanzhou (who also happened to be the founder’s daughter), had committed bank fraud by falsely telling the British financial services company HSBC that her company was not doing business with Iran. Canadian authorities, acting on a U.S. request, arrested her as she was traveling through Vancouver in December 2018. The U.S. Department of Justice charged both Huawei and Meng with wire fraud and a number of other crimes, and the United States used restrictions on the export of U.S. technology to pressure Taiwan Semiconductor Manufacturing Company, which supplies many crucial semiconductors, into cutting off Huawei’s access to the most advanced chips. Beijing, meanwhile, detained two Canadians in China and essentially held them hostage.

Santa may not know whether you’ve been bad or good, but the NSA probably does.

After spending almost three years under house arrest in Canada, Meng entered into an agreement in which she admitted to many of the charges and was allowed to return to China; the Chinese government then released the Canadians. But by that point, Huawei was a much-diminished force, and the prospects for Chinese dominance of 5G had vanished—at least in the near term. The United States had quietly waged a postmodern war on China, and won.

At first glance, this victory could seem like unambiguously good news. Washington, after all, limited the technological reach of a dictatorial regime without having to use force. The United States’ ability to cut North Korea off from much of the world financial system, or its successful sanctioning of Russia’s central bank, might also prompt rightful cheers. It is hard to be outraged by the United States’ use of hidden powers to block global terrorism, break up drug cartels, or hobble Russian President Vladimir Putin’s attempt to subjugate Ukraine.

Yet there are clearly risks in the exercise of these powers. Farrell and Newman, for their part, are worried about the possibility of overreach. If the United States uses its economic power too freely, they write, it could undermine the basis of that power. For example, if the United States weaponizes the dollar against too many countries, they might successfully band together and adopt alternative methods of international payment. If countries become deeply worried about U.S. spying, they could lay fiber-optic cables that bypass the United States. And if Washington puts too many restrictions on American exports, foreign firms might turn away from U.S. technology. For example, Chinese designed software may not be a match for the United States’, but it is not too hard to imagine some regimes accepting inferior quality as the price for getting out from under Washington’s thumb.

So far, none of this has happened. Despite endless breathless commentary about the potential demise of the dollar, the currency reigns supreme. In fact, as Farrell and Newman write, the dollar endured despite the “vicious stupidity” of the Trump administration. Laying fiber-optic cables that bypass the United States might be easier to accomplish, and people who are not technologists do not really know how easily U.S. software can be replaced. Still, Washington’s hidden power seems remarkably durable.

 

Reflections off of a currency exchange board in Buenos Aires, Argentina, September 2019

Agustin Marcarian / Reuters

 

But that does not mean there are no limits to how far the United States can push. Farrell and Newman worry that China, which is an economic superpower in its own right, might decide to “defend itself by going dark”: cutting off international financial and information linkages to the wider world (which it already does to some extent). Such an action would have significant economic costs for everyone. It would degrade China’s role as the workshop of the world, which—in its own way—might be as hard to replace as the global role of the U.S. dollar.

There is also the obvious risk that countries that lose wars without gun smoke could lash out by waging wars with gun smoke. As Farrell and Newman write, the weaponization of trade is one of the factors that contributed to World War II: Germany and Japan both engaged in wars of conquest, in part, to secure access to raw materials they feared might be cut off by international sanctions. The nightmare scenario for today would be if China, fearful that it is being marginalized, were to strike back by invading Taiwan, which plays a key role in the global semiconductor industry.

But even if the United States does not overuse its underground empire or provoke hot conflict, there is still a major reason to worry about Washington’s dramatic economic and data power: the United States will not always be in the right. Washington has made plenty of unethical foreign policy decisions, and it could use its control over global chokepoints to harm people, companies, and states that should not come under fire. Trump, for example, slapped tariffs on Canada and Europe. It is not hard to imagine that if he were to win a second term, he would try to hobble the economies of European states critical of his foreign or even domestic policies. One does not have to see everything through the lens of the Iraq war or insist that the United States somehow forced Putin to invade Ukraine to be worried about the underground empire’s lack of accountability.

RULES OF THE ROAD

Farrell and Newman do not propose policies that could mitigate these risks, other than suggesting that the underground empire deserves the same kind of sophisticated thinking once devoted to nuclear rivalries. Still, by highlighting how the nature of global power has changed, the book makes an enormous contribution to the way analysts think about influence. And policymakers and researchers should begin formulating plans for fixing these problems.

One possible resolution would be to create international rules for the exploitation of economic chokepoints, along the lines of the rules that have constrained tariffs and other protectionist measures since the creation of the General Agreement on Tariffs and Trade, in 1947. As every trade economist knows, the GATT (and the World Trade Organization that grew out of it) does more than just protect nations from each other. It protects them from their own bad instincts.

It will be hard to do something similar with newer forms of economic power. But to keep the world safe, experts should try to come up with regulations that have the same moderating effect. The stakes are too high to let these challenges go unaddressed.

 

• PAUL KRUGMAN, winner of the 2008 Nobel Prize in Economics, is Distinguished Professor of Economics at the Graduate Center of the City University of New York.

 

O tamanho da crise econômica da China - Paul Krugman (NYT, OESP)

O Brasil seria mais impactado por uma crise chinesa do que os EUA (pouco) ou o Japão e a Alemanha, que vendem muito para a China. Ou seja, o Brasil é um perdedor se a China entrar em recessão. 

O tamanho da crise econômica da China

Paul Krugman

O Estado de S. Paulo | Internacional

30 de agosto de 2023

Paul Krugman 

É colunista e ganhador do prêmio Nobel de Economia de 2008

The New York Times

Graças à baixa exposição da economia dos EUA, é difícil que problemas chineses se tornem globais

O efeito da crise seria maior em países que vendem mais para a China, como Alemanha e Japão

A s agruras econômicas dos anos pós-pandêmicos têm ocasionado intensos debates intelectuais e sobre políticas. Algo com que quase todos concordam, porém, é que a crise póscovid se assemelha pouco à crise financeira de 2008. Mas a China – segunda maior economia do planeta – parece balançar à beira de uma crise muito parecida.

Eu não confio no meu próprio entendimento sobre a China para julgar se o país vive seu momento Minsky, o ponto em que todos de repente se dão conta de que uma dívida insustentável é, de fato, insustentável. E, de fato, duvido que alguém ? incluindo as autoridades chinesas ? saiba responder a essa questão.

Mas acho que somos capazes de responder a uma pergunta mais condicional: se a China realmente passa por uma crise em estilo 2008, ela transbordará para o restante do mundo? E a resposta é clara: não. Por maior que seja a economia chinesa, os EUA estão pouco expostos aos problemas chineses. Antes de chegar aí, contudo, falemos sobre por que a China de 2023 se assemelha às economias americana e europeia de 2008.

BOLHA. A crise de 2008 foi ocasionada pelo estouro de uma bolha imobiliária transatlântica. Os efeitos foram amplificados por perturbações financeiras, especialmente o colapso dos ditos "shadow banks" – instituições que agiam clandestinamente como bancos, criando riscos de uma corrida bancária, mas prescindindo de regulamentações e de redes de segurança.

E agora chega a China, com um setor imobiliário ainda mais inchado que o dos países ocidentais em 2008. A China também tem um atribulado setor de "shadow banking", além de problemas peculiares, como dívidas enormes de governos locais.

A boa notícia é que a China não é a Argentina ou a Grécia, que deviam quantias imensas a credores estrangeiros. A dívida em questão aqui é de dinheiro que a China deve para si mesma. E deveria ser possível, em princípio, para o governo nacional resolver a crise por meio de alguma combinação entre resgates de devedores e abatimentos para credores.

Mas o governo da China tem competência para gerir o tipo de reestruturação financeira? As autoridades chinesas têm determinação ou clareza intelectual para fazer o que é necessário? Eu me preocupo especialmente com a segunda questão.

A China precisa substituir o investimento imobiliário insustentável por maior demanda de consumo. Mas alguns relatos sugerem que autoridades chinesas mais graduadas continuam suspeitas em relação a gastos de consumo "supérfluos" e resistem à ideia de "dar poder para os indivíduos tomarem mais decisões a respeito de como gastar seu dinheiro".

E não é nada tranquilizador o fato de as autoridades chinesas estarem respondendo à possível crise pressionando os bancos para emprestar mais, basicamente continuando a política que levou a China à situação em que ela se encontra.

EXPOSIÇÃO. Portanto, a China poderá entrar em crise. Se entrar, como isso afetará os EUA? A resposta, até onde eu consigo perceber, é que a exposição dos americanos a uma possível crise chinesa é surpreendentemente pequena.

Quanto os EUA têm investido na China? O investimento direto é de US$ 215 bilhões. Investimentos em carteira – ações e obrigações –, pouco mais de US$ 300 bilhões. Então, estamos falando de um total de US$ 515 bilhões.

Este número pode parecer grande, mas, para uma economia enorme, não é. Considerem uma comparação. Neste momento, há muitas preocupações a respeito do setor imobiliário comercial dos EUA, especialmente em relação aos prédios de escritórios ? que provavelmente encaram uma redução permanente na demanda em virtude do aumento do trabalho remoto. Os prédios de escritórios dos EUA valem hoje US$ 2,6 trilhões, aproximadamente cinco vezes mais que o nosso investimento total na China.

Por que uma economia tão grande atraiu tão pouco investimento dos EUA? Basicamente, porque, dadas as arbitrariedades das políticas chinesas, muitos possíveis investidores temem a possibilidade de a China se tornar uma armadilha: você consegue entrar, mas não consegue sair.

Mas o que dizer da China enquanto mercado? A China é uma importante jogadora no comércio mundial, mas não compra muito dos EUA – apenas US$ 150 bilhões, em 2022, menos de 1% do nosso PIB. Portanto, uma crise não surtiria muito efeito direto na demanda por produtos americanos.

O efeito seria maior em países que vendem mais para a China, como Alemanha e Japão, e algo poderia ricochetear nos EUA por meio das vendas a esses países. Mas o efeito geral ainda seria pequeno.

DIFERENÇAS. 

Uma crise poderia até surtir um pequeno efeito positivo nos EUA, porque reduziria a demanda por matérias-primas, especialmente petróleo, o que reduziria a inflação. Nada disso significa que devamos aplaudir a possibilidade de uma recessão chinesa ou tripudiar sobre os problemas de outro país.

Mesmo que por razões puramente egoístas, devemos nos preocupar com o que o regime chinês poderá fazer para distrair a atenção de seus cidadãos dos problemas domésticos. Mas, em termos econômicos, parece que estamos diante de uma possível crise interna na China, não de um evento global em estilo 2008. 

TRADUÇÃO DE GUILHERME RUSS

O debate sobre as desigualdades do capitalismo: Paul Krugman, Joseph Stiglitz, Thomas Piketty - YouTube (2015)

Um video de 2015, mas importante pelo seu tema, não tanto pelos participantes. A despeito de dois Prêmios Nobel, não os considero grandes economistas, pela exata razão de que são mais ideólogos do que economistas. O tema é central na obra do francês, mas acho que seu socialismo como prescrição prejudica suas boas teses sobre a concentração de renda.
O que identifica os três, a despeito de especialidades diferentes na economia, é a desconfiança dos mercados e a confiança que os três devotam ao Estado como "corretor das desigualdades".
Paulo Roberto de Almeida

https://www.youtube.com/watch?v=Si4iyyJDa7c

Thomas Piketty, Paul Krugman and Joseph Stiglitz: The Genius of Economics

Publicado em 6 de mar de 2015

Piketty, arguably the world’s leading expert on income and wealth inequality, does more than document the growing concentration of income in the hands of a small economic elite. He also makes a powerful case that we’re on the way back to ‘patrimonial capitalism,’ in which the commanding heights of the economy are dominated not just by wealth, but also by inherited wealth, in which birth matters more than effort and talent,” wrote Paul Krugman in The New York Times. Krugman and his fellow Nobel laureate Joseph Stiglitz (author of The Great Divide) join Piketty to discuss the genius of economics.

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Krugman: o keynesiano das causas erradas (mais que a media...)

Paul Krugman ganhou seu Prêmio Nobel supostamente por seus trabalhos em comércio internacional. Seria melhor que ficasse nessa área, pois como comentarista de jornal, ele virou um homem de causas erradas.
Os keynesianos de vez em quando acertam umas e outras: Krugman tem errado todas.

Paulo Roberto de Almeida 

November 3, 2013

Those Depressing Germans

By PAUL KRUGMAN

German officials are furious at America, and not just because of the business about Angela Merkel’s cellphone. What has them enraged now is one (long) paragraph in a U.S. Treasury report on foreign economic and currency policies. In that paragraph Treasury argues that Germany’s huge surplus on current account — a broad measure of the trade balance — is harmful, creating “a deflationary bias for the euro area, as well as for the world economy.”

The Germans angrily pronounced this argument “incomprehensible.” “There are no imbalances in Germany which require a correction of our growth-friendly economic and fiscal policy,” declared a spokesman for the nation’s finance ministry.

But Treasury was right, and the German reaction was disturbing. For one thing, it was an indicator of the continuing refusal of policy makers in Germany, in Europe more broadly and for that matter around the world to face up to the nature of our economic problems. For another, it demonstrated Germany’s unfortunate tendency to respond to any criticism of its economic policies with cries of victimization.

First, the facts. Remember the China syndrome, in which Asia’s largest economy kept running enormous trade surpluses thanks to an undervalued currency? Well, China is still running surpluses, but they have declined. Meanwhile, Germany has taken China’s place: Last year Germany, not China, ran the world’s biggest current account surplus. And measured as a share of G.D.P., Germany’s surplus was more than twice as large as China’s.

Now, it’s true that Germany has been running big surpluses for almost a decade. At first, however, these surpluses were matched by large deficits in southern Europe, financed by large inflows of German capital. Europe as a whole continued to have roughly balanced trade.

Then came the crisis, and flows of capital to Europe’s periphery collapsed. The debtor nations were forced — in part at Germany’s insistence — into harsh austerity, which eliminated their trade deficits. But something went wrong. The narrowing of trade imbalances should have been symmetric, with Germany’s surpluses shrinking along with the debtors’ deficits. Instead, however, Germany failed to make any adjustment at all; deficits in Spain, Greece and elsewhere shrank, but Germany’s surplus didn’t.

This was a very bad thing for Europe, because Germany’s failure to adjust magnified the cost of austerity. Take Spain, the biggest deficit country before the crisis. It was inevitable that Spain would face lean years as it learned to live within its means. It was not, however, inevitable that Spanish unemployment would be almost 27 percent, and youth unemployment almost 57 percent. And Germany’s immovability was an important contributor to Spain’s pain.

It has also been a bad thing for the rest of the world. It’s simply arithmetic: Since southern Europe has been forced to end its deficits while Germany hasn’t reduced its surplus, Europe as a whole is running large trade surpluses, helping to keep the world economy depressed.

German officials, as we’ve seen, respond to all of this with angry declarations that German policy has been impeccable. Sorry, but this (a) doesn’t matter and (b) isn’t true.

Why it doesn’t matter: Five years after the fall of Lehman, the world economy is still depressed, suffering from a persistent shortage of demand. In this environment, a country that runs a trade surplus is, to use the old phrase, beggaring its neighbors. It’s diverting spending away from their goods and services to its own, and thereby taking away jobs. It doesn’t matter whether it’s doing this maliciously or with the best of intentions, it’s doing it all the same.

Furthermore, as it happens, Germany isn’t blameless. It shares a currency with its neighbors, greatly benefiting German exporters, who get to price their goods in a weak euro instead of what would surely have been a soaring Deutsche mark. Yet Germany has failed to deliver on its side of the bargain: To avoid a European depression, it needed to spend more as its neighbors were forced to spend less, and it hasn’t done that.

German officials won’t, of course, accept any of this. They consider their country a shining role model, to be emulated by all, and the awkward fact that we can’t all run gigantic trade surpluses simply doesn’t register.

And the thing is, it’s not just the Germans. Germany’s trade surplus is damaging for the same reason cutting food stamps and unemployment benefits in America destroys jobs — and Republican politicians are about as receptive as German officials to anyone who tries to point out their error. In the sixth year of a global economic crisis whose essence is that there isn’t enough spending, many policy makers still don’t get it. And it looks as if they never will.

O colunista de humor Paul Krugman - William L. Anderson

Krugman’s Adventures in Fairyland by William L. Anderson  Mise Daily, November 23, 2013 After studying and teaching Keynesian economics for 30 years, I conclude that the “sophisticated” Keynes­ians really do believe in magic and fairy dust. Lots of fairy dust. It may seem odd that this Aus­trian economist refers to fairies, but I got the term from Paul Krugman. According to Krugman, too many people place false hopes in what he calls the “Confidence Fairy,” a creature created as a retort to economist Robert Higgs’s concept of “regime uncertainty.” Higgs coined that expression in a 1997 paper on the Great Depression in which he claimed that uncertainty caused by the policies of Franklin Roosevelt’s New Deal was a major factor in the Great Depression being so very, very long. Nonsense, writes Krugman. Investors are not waiting for governments to “get their financial houses in order” and protect private property. Instead, he claims, investors are waiting for governments to spend in order to create enough “aggregate demand” in the economy to bring about new investments and, one hopes, full employment. According to Higgs, the “humor columnist for the New York Times, Paul Krugman, has recently taken to defending his vulgar Keynesianism against its critics by accusing them of making arguments that rely on the existence of a ‘confidence fairy.’ By this mockery,” Higgs says, “Krugman seeks to dismiss the critics as unscientific blockheads, in contrast to his own supreme status as a Nobel Prize-winning economic scientist.” It seems, however, that Krugman and the Keynesians have manufactured some fairies of their own: the Debt Fairy and the Inflation Fairy. These two creatures may not carry bags of fairy dust, but they might as well, given that their “tools” of using government debt and printing money to “revitalize” the economy have the same scientific credibility. Let us first examine the Debt Fairy. According to the Keynesians, the U.S. economy (as well as the economies of Europe and Japan) languishes in a “liquidity trap.” This is a condition in which interest rates are near-zero and people hoard money instead of spending it. Lowering interest rates obviously won’t spur more business borrowing, so it is up to the government to take advantage of the low rates and borrow (and borrow). If governments issue enough debt, argue Debt Fairy True Believers, the econ­omy will gain “traction” as government spending, through the power of pixie dust, fuels a recovery. Governments spend, businesses magically gain confidence, and then they spend and invest. (At this point, we are apparently supposed to just overlook the fact that the Keynesians are saying that we need the Debt Fairy to resurrect the Keynesian version of the Confidence Fairy.) The Inflation Fairy also plays an important role, according to Keynesians, for if bona fide inflation can take hold in the econ­omy and people watch their money lose value, then they will spend more of their savings. In turn, this destruction of savings will, through the power of Keynesian sorcery, revive the econ­omy. Thus inflation undermines what Keynesians call the “Para­dox of Thrift,” a theory that says if a lot of people withhold some present consumption in order to save for future con­sumption, the economy quickly will implode and ultimately will slip into a Liquidity Trap in which no one will spend anything. These fairies can work their magic if (and only if) one condition exists: factors of production are homogeneous, which means that government spending will enable all lines of production simultaneously. The actual record of the boom-and-bust cycle, however, tells a different story. It seems that the Debt and Inflation Fairies enable booms along certain lines of production (such as housing during the past decade), but as everyone knows, the fairy dust lost its magical powers and the booms collapsed into recessions. Austrians such as Mises and Rothbard have well under­stood what Keynesians do not: the structures of produc­tion within an economy are heterogeneous and can be distorted by government intervention through inflation and massive borrowing. Far from being creatures that can “save” an economy, the Debt Fairy and the Inflation Fairy are the architects of economic disaster. Despite Keynesian protestations that the U.S. and European governments are engaged in “austerity,” the twin fairies are active on both continents. The fairy dust they are sprinkling on the economy, however, is more akin to sprinkling ricin on humans. In the end, the good fairies turn into witches. Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute. Comment on this article. When commenting, please post a concise, civil, and informative comment. William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him mail. See William L. Anderson's article archives.

A Franca, os krugmanianos e o desastre econômico - carta ao NYTimes

Os krugmanianos do primeiro mundo, nos EUA e na Europa, são keynesianos da nova síntese, nada a ver com os nossos keynesianos de botequim.
Este leitor do NYTimes reclama do tremendo equívoco do Paul Krugman, colunista do NYTimes (que quase não leio, tantas são as bobagens que ele não cansa de repetir), que achava que a França fez bem em não aplicar um "ajuste fiscal" rigoroso, pois isso iria, segundo ele, penalizar os mais pobres.
Ora, o problema da França é que ela não consegue criar empregos, e vem perdendo empregos aceleradamente, justamente por ter um regime inviável para as empresas.
O Brasil, aliás, vai pelo menos caminho, mas os nossos keynesianos são muito piores...
Paulo Roberto de Almeida

LETTERS

France’s Problem Isn’t ‘Deficit Scolds’

The New York Times, November 15, 2013

Reading Paul Krugman’s column “The plot against France” (Opinion, Nov. 12), I could feel your French readers choking on their croissants. Many of us have appreciated his campaign against “deficit scolds” in Washington. But he just lost us all. “France,” he writes, “has committed the unforgivable sin of being fiscally responsible without inflicting pain on the poor and unlucky.”

No, the truth is that the unemployment rate — more than 11 percent — is so high largely because the taxes, social charges and over-regulation imposed on employers by successive governments make creating jobs in France a near impossibility.

David Woods La Bastidonne, France

Monopolistas de fato e a extracao de renda dos consumidores - Paul Krugman

The New York Times, August 25, 2013

The Decline of E-Empires

By PAUL KRUGMAN

Steve Ballmer’s surprise announcement that he will be resigning as Microsoft’s C.E.O. has set off a huge flood of commentary. Being neither a tech geek nor a management guru, I can’t add much on those fronts. I do, however, think I know a bit about economics, and I also read a lot of history. So the Ballmer announcement has me thinking about network externalities and Ibn Khaldun. And thinking about these things, I’d argue, can help ensure that we draw the right lessons from this particular corporate upheaval.

First, about network externalities: Consider the state of the computer industry circa 2000, when Microsoft’s share price hit its peak and the company seemed utterly dominant. Remember the T-shirts depicting Bill Gates as a Borg (part of the hive mind from “Star Trek”), with the legend, “Resistance is futile. Prepare to be assimilated”? Remember when Microsoft was at the center of concerns about antitrust enforcement?

The odd thing was that nobody seemed to like Microsoft’s products. By all accounts, Apple computers were better than PCs using Windows as their operating system. Yet the vast majority of desktop and laptop computers ran Windows. Why?

The answer, basically, is that everyone used Windows because everyone used Windows. If you had a Windows PC and wanted help, you could ask the guy in the next cubicle, or the tech people downstairs, and have a very good chance of getting the answer you needed. Software was designed to run on PCs; peripheral devices were designed to work with PCs.

That’s network externalities in action, and it made Microsoft a monopolist.

The story of how that state of affairs arose is tangled, but I don’t think it’s too unfair to say that Apple mistakenly believed that ordinary buyers would value its superior quality as much as its own people did. So it charged premium prices, and by the time it realized how many people were choosing cheaper machines that weren’t insanely great but did the job, Microsoft’s dominance was locked in.

Now, any such discussion brings out the Apple faithful, who insist that anything Windows can do Apple can do better and that only idiots buy PCs. They may be right. But it doesn’t matter, because there are many such idiots, myself included. And Windows still dominates the personal computer market.

The trouble for Microsoft came with the rise of new devices whose importance it famously failed to grasp. “There’s no chance,” declared Mr. Ballmer in 2007, “that the iPhone is going to get any significant market share.”

How could Microsoft have been so blind? Here’s where Ibn Khaldun comes in. He was a 14th-century Islamic philosopher who basically invented what we would now call the social sciences. And one insight he had, based on the history of his native North Africa, was that there was a rhythm to the rise and fall of dynasties.

Desert tribesmen, he argued, always have more courage and social cohesion than settled, civilized folk, so every once in a while they will sweep in and conquer lands whose rulers have become corrupt and complacent. They create a new dynasty — and, over time, become corrupt and complacent themselves, ready to be overrun by a new set of barbarians.

I don’t think it’s much of a stretch to apply this story to Microsoft, a company that did so well with its operating-system monopoly that it lost focus, while Apple — still wandering in the wilderness after all those years — was alert to new opportunities. And so the barbarians swept in from the desert.

Sometimes, by the way, barbarians are invited in by a domestic faction seeking a shake-up. This may be what’s happening at Yahoo:Marissa Mayer doesn’t look much like a fierce Bedouin chieftain, but she’s arguably filling the same functional role.

Anyway, the funny thing is that Apple’s position in mobile devices now bears a strong resemblance to Microsoft’s former position in operating systems. True, Apple produces high-quality products. But they are, by most accounts, little if any better than those of rivals, while selling at premium prices.

So why do people buy them? Network externalities: lots of other people use iWhatevers, there are more apps for iOS than for other systems, so Apple becomes the safe and easy choice. Meet the new boss, same as the old boss.

Is there a policy moral here? Let me make at least a negative case: Even though Microsoft did not, in fact, end up taking over the world, those antitrust concerns weren’t misplaced. Microsoft was a monopolist, it did extract a lot of monopoly rents, and it did inhibit innovation. Creative destruction means that monopolies aren’t forever, but it doesn’t mean that they’re harmless while they last. This was true for Microsoft yesterday; it may be true for Apple, or Google, or someone not yet on our radar, tomorrow.

China: the Great Crash - Paul Krugman

Paul Krugman by Fred R. Conrad/The New York Times

OP-ED COLUMNIST

Hitting China’s Wall

By PAUL KRUGMAN

The New York Times: July 18, 2013

All economic data are best viewed as a peculiarly boring genre of science fiction, but Chinese data are even more fictional than most. Add a secretive government, a controlled press, and the sheer size of the country, and it’s harder to figure out what’s really happening in China than it is in any other major economy.

Yet the signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.

Start with the data, unreliable as they may be. What immediately jumps out at you when you compare China with almost any other economy, aside from its rapid growth, is the lopsided balance between consumption and investment. All successful economies devote part of their current income to investment rather than consumption, so as to expand their future ability to consume. China, however, seems to invest only to expand its future ability to invest even more. America, admittedly on the high side,devotes 70 percent of its gross domestic product to consumption; for China, the number is only half that high, while almost half of G.D.P. is invested.

How is that even possible? What keeps consumption so low, and how have the Chinese been able to invest so much without (until now) running into sharply diminishing returns? The answers are the subject of intense controversy. The story that makes the most sense to me, however, rests on an old insight by the economist W. Arthur Lewis, who argued that countries in the early stages of economic development typically have a small modern sector alongside a large traditional sector containing huge amounts of “surplus labor” — underemployed peasants making at best a marginal contribution to overall economic output.

The existence of this surplus labor, in turn, has two effects. First, for a while such countries can invest heavily in new factories, construction, and so on without running into diminishing returns, because they can keep drawing in new labor from the countryside. Second, competition from this reserve army of surplus labor keeps wages low even as the economy grows richer. Indeed, the main thing holding down Chinese consumption seems to be that Chinese families never see much of the income being generated by the country’s economic growth. Some of that income flows to a politically connected elite; but much of it simply stays bottled up in businesses, many of them state-owned enterprises.

It’s all very peculiar by our standards, but it worked for several decades. Now, however, China has hit the “Lewis point” — to put it crudely, it’s running out of surplus peasants.

That should be a good thing. Wages are rising; finally, ordinary Chinese are starting to share in the fruits of growth. But it also means that the Chinese economy is suddenly faced with the need for drastic “rebalancing” — the jargon phrase of the moment. Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The question is whether this can happen fast enough to avoid a nasty slump.

And the answer, increasingly, seems to be no. The need for rebalancing has been obvious for years, but China just kept putting off the necessary changes, instead boosting the economy by keeping the currency undervalued and flooding it with cheap credit. (Since someone is going to raise this issue: no, this bears very little resemblance to the Federal Reserve’s policies here.) These measures postponed the day of reckoning, but also ensured that this day would be even harder when it finally came. And now it has arrived.

How big a deal is this for the rest of us? At market values — which is what matters for the global outlook — China’s economy is still only modestly bigger than Japan’s; it’s around half the size of either the U.S. or the European Union. So it’s big but not huge, and, in ordinary times, the world could probably take China’s troubles in stride.

Unfortunately, these aren’t ordinary times: China is hitting its Lewis point at the same time that Western economies are going through their “Minsky moment,” the point when overextended private borrowers all try to pull back at the same time, and in so doing provoke a general slump. China’s new woes are the last thing the rest of us needed.

No doubt many readers are feeling some intellectual whiplash. Just the other day we were afraid of the Chinese. Now we’re afraid for them. But our situation has not improved.

A version of this op-ed appeared in print on July 19, 2013, on page A25 of the New York edition with the headline: Hitting China’s Wall.