I really like these chats Paul Krugman has with Joe Weisenthal, because you can get his news-you-can-use take on something without all the hemming and hawing, and lack of body language, from multiple blog posts. Also, Weisenthal adds to the clarification because he will make sure Krugman gets a chance to clear up any possible misconception.
Go ahead and watch this short clip. Then I’ll offer some observations.
First, Krugman admits that he really doesn’t know why the US economy apparently “needs bubbles” in order to grow, not just since 2008 but indeed for the last decade and going forward as far as the eye can see.
Second, Weisenthal and Krugman are both clear that he doesn’t want bubbles, it’s just that the economy right now needs some major changes to avoid the “need” for them. And–even though Krugman has admitted he doesn’t know exactly what’s causing it–he is knowledgeable enough to offer the following recommendations to help right things:
(1) Weaker dollar.
(2) Stronger social safety net.
(3) Somewhat permanent government fiscal stimulus (though he hedged himself on this one).
(4) Permanently higher price inflation target of 4% annually.
To repeat, everybody, the above isn’t something he wants to get us through to 2015. No, this is the new normal in Krugman’s (and Larry Summers’) world.