Wednesday, February 15, 2012

Now the NY Fed Piles on Krugman's Idiotic Warning on the Great Depression

Just weeks ago, Paul Krugman told us all that the Great Recession was continuing and that severe actions would be needed to reverse the gloom. Yes, this was the Paul Krugman of early December:
...under depression conditions — which is what we have now — inflation is very much a positive thing.

Huh, some depression conditions. Here's what the New York Fed is saying was going on in the economy just weeks before Krugman gave his big warning. The Fed writes today:
Just Released: February’s Empire State Manufacturing Survey Signals a Further Pickup

February’s Empire State Manufacturing Survey (ESMS) indicates that manufacturing activity in New York State continued to expand for a third consecutive month. The survey’s headline index rose an encouraging six points to 19.5, its highest level in more than a year. Other indicators in the report show steady growth in orders, shipments, and employment, and fairly widespread planned increases in capital spending.

One reason that we find today’s report encouraging is that the survey’s jobs index has been sending some positive signals. So far in 2012, manufacturers have reported more favorable employment trends than in the second half of 2011. Since the index tends to move in parallel with manufacturing employment for the state as a whole, these findings may foreshadow some improvement in New York’s employment numbers...

Moving from present conditions to the outlook for the next six months, we find that manufacturers remain quite optimistic about business prospects. In particular, considerably more than a third of those surveyed plan to add workers, and capital spending is expected to rise at a good clip.
As for Krugman's deflation warning, NYFed writes:
On the pricing front, the February report indicates that input prices have continued to rise, but considerably less than during the first half of 2011 when energy prices were climbing rapidly. As for selling prices, the pace of increase has picked up somewhat compared with the second half of 2011, though price increases remain moderate.
Uh, energy prices are starting to rise again. The price inflation numbers will further accelerate. The Fed like Krugman has no correct model of the economy to forecast what is developing. They just see what is directly in front of them. The improving manipulated economy is becoming obvious. That's why NYfed gets that. Down the road the price inflation will become obvious and they will comment on that, for now, though, we are just left with a total diss by the NYfed of Krugman's depression warning and his deflation warning.

1 comment:

  1. I bet Krugman is sad we wont have a Depression. Maybe what he was really forecasting was his own depression: sadness from being wrong so many times. It's ok Kruggy, not everyone can be right all the time or, in your case, once.