[Travel day, so no more until later.]
Keynes Is Slowly Winning: Back in 2010, I had a revelation about just how bad economic policy was about to get; I read the OECD Economic Outlook, which called not just for fiscal austerity but for interest rate hikes — 350 basis points on the Fed funds rate by the end of 2011! — because, well, because.
Now, the OECD is calling for fiscal and monetary stimulus in Europe. ....
It has taken a while. ... But the hawks seem in retreat at the Fed; Mario Draghi ... sounds an awful lot like Janet Yellen; the whole way we’re discussing Japan is very much on Keynesian turf. Three and a half years ago Businessweek was declaring that expansionary austerian Alberto Alesina was the new Keynes; now it tells us that Keynes is the new Keynes. And we have people like Paul Singer complaining about the “Krugmanization” of the debate.
Why does the tide finally seem to be turning? Partly, I think, it’s just a matter of time; after six years it’s becoming hard not to notice that the anti-Keynesians have been wrong about everything. Europe’s slide toward deflation makes it even harder to deny the realities of liquidity-trap economics. And the refusal of almost everyone on the anti-Keynesian side to admit any kind of error has gradually made them look ridiculous.
All of this may be coming too little and too late to avoid policy disaster, especially in Europe. But it’s something to cheer, faintly.