Must-Read: Paul Krugman: I’m With Stupid

Must-Read: Paul Krugman: I’m With Stupid: “James Montier… castigat[es] economists for their…

…belief that central bank-set interest rates matter…. Janet Yellen, Larry Summers, and yours truly…. [But] if you were going to look for economists who blindly repeat doctrine… neither Janet Yellen nor Larry Summers would be top picks…. Montier… [says] interest rates move… [and] business investment is… unaffected…. Here’s what I wrote some years ago:

Back in the old days, when dinosaurs roamed the earth and students still learned Keynesian economics, we… learned… that the transmission mechanism worked largely through housing…. Fed policy, by moving interest rates, normally exerts its effect mainly through housing….

Montier seems to have forgotten about housing…. Are there times when monetary policy… can’t do the job? Of course. Summers and I have been talking about the zero lower bound since the 1990s…. There’s plenty of real stupidity in the world; we don’t need to… critique… imaginary stupidity.