Krugman observes that after the original stimulus:
* Interest rates DID NOT rise as many feared. He argued that the stimulus was too small. Temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go.
* Inflation did not rise as many feared. Key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.
* GDP Growth DID accelerate last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.
IN OTHER WORDS, THE STIMULUS WORKED, BUT IT DID NOT WORK BECAUSE IT WAS NOT APPLIED IN A SUFFICIENT SCALE !!!
ERGO : WE NEED ANOTHER ROUND. A BIGGER ONE AT THAT !!
That’s this Nobel Economics Laureate’s take.
I don’t remember worrying about inflation during the 1st stimulus. I remember worrying about deflation because of rising unemployment.
It was the low interest rates that were said to possibly cause inflation if they were kept low too long.
I don’t know much about inflation, but I do know that just about everything I buy at the grocery store costs more than it did a year ago.
GDP did go up, but understand why. It went up because government spending is automatically added when they calculate the GDP. If they increased government spending by a gazzillion, then you’d increase GDP by a gazzillion. But that doesn’t mean you’d be a gazzillion dollars richer. It’s all meaningless money. The question is what did you get for that gazzillion dollars? In the case of government, not much.