"Wonking Out: It’s a Lagged, Lagged, Lagged, Lagged World"

     Several days ago in the New York Times, there was an article that was released by Paul Krugman entitled "Wonking Out: It’s a Lagged, Lagged, Lagged, Lagged World." In this article, Krugman talks about how the Federal Reserve is a way of shaping the current Economic Policy in the United States by raising interest rates, which should cool down the rising inflation. 

    Krugman says that so far the Fed has been successful in tightening financial conditions. He also says that with this policy, the Fed operates in two channels "Tight money raises mortgage rates, which causes a housing slump, and it also leads to a strong dollar, which eventually makes U.S. goods less competitive on world markets." On both channels thus far, the policy has been successful in financial terms but so far Economists have yet to see any evidence of Economic cooling. 

    The evidence that has been released in the last week has seen the opposite of what the Fed has hoped. The latest inflation report provided by the Bureau of Labor showed still rising rates though the GDP report that has been recently released in a way disputed claims of us already being in a recession because it was relatively strong though. Krugman hints that numbers rarely "speak for themselves," which has led to many heated arguments among Economists. A majority of these arguments have sprouted from not knowing what figure to look at. Some think that looking at the growth rate in terms of annually helps to understand what is happening in the economy. Others believe that the number to watch out for is the "core GDP," which is a figure that excludes " net exports, inventory changes, and government purchases."

    Throughout the rest of the article, Krugman talks about the issue of inflation. He believes that the reason why we have not seen the cool-down effect from the Fed's new policy is that "there are good reasons to believe that there are long lags between policy changes and the reported numbers." Overall I really enjoyed this article and I thought it was a good extension of what we have learned so far in this course. 

https://www.nytimes.com/2022/10/28/opinion/fed-inflation-interest-rates.html