Tim F.: The "Moderate" Republicans' Dilemma
Noted for Your Morning Procrastination for November 6, 2013

Paul Krugman: Europe's Inflation Problem: It's Too Low: Noted

Paul Krugman: Europe's Inflation Problem :

There are two reasons moderate inflation is actually a good thing for modern economies — one involving demand, one involving supply. On the demand side, inflation reduces the problem of the zero lower bound: nominal interest rates can’t go negative, but real rates can to the extent that modest inflation is embedded in expectations. On the supply side, inflation reduces the problem of downward nominal wage rigidity: people are very reluctant to demand or accept actual wage cuts, which becomes a serious constraint if the relative wages of large groups of workers “need” to fall.

Both problems are very much present in the United States, but they’re even worse in the euro area...

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