Brad DeLong discusses Paul Krugman’s column:
Today we have next to no hard-money lobby, for nearly everybody has a substantially diversified portfolio and suffers mightily when unemployment is high and capacity utilization and spending are low. …
But here we are, with Austerians. So cui bono? Who benefits from austerity in the U.S.? How in the North Atlantic can we have a large political movement pushing for the hardest of hard-money policies when there is no hard-money lobby with its wealth on the line? How is it that the unemployed, and those who fear they might be the next wave of unemployed, do not register at the electoral polls? Why are politicians not terrified of their displeasure? … Why is the idea…that the first task of the government is to undertake strategic interventions in financial markets to stabilize the flow of economy-wide spending now a contested one?
Paul sees a material interest link: he sees German and Chinese governments that seek a continued large U.S. trade deficit to allow their export surpluses, Republican politicians who think trashing the economy is the way to majorities, and economists who think that supporting Republican politicians is the road to influence. I don’t think that can be a complete explanation: very few people are comfortable living with the idea that they are villains wreaking destruction on the world for their own narrow advantage.
Thus I read Charles Calomiris’s claim that it is inappropriate for the Federal Reserve to aim for a short-term nominal GDP growth rate above 5% per year no matter how high the unemployment rate, and I am simply bewildered…
I have no problem believing that people can ignore suffering elsewhere and put their bank accounts first.