[lbo-talk] Krugman on interest rate weirdness

[Doug Henwood]

On Mar 24, 2008, at 4:55 AM, Michael Pollak quoted Paul Krugman:

> But I have a possibly naive question: can the Fed really cut the  
> Fed funds
> rate that far?

Yeah, sure. They can flood the system with reserves and take it down  
to 0 if they want. They can't force banks to make loans if they don't  
want to, but that's another story.

What's up with Krugman lately? His NYT col today takes Obama to task  
for claiming that the Iraq war has hurt the U.S. economy, pointing to  
the stimulative effect of wars in the past. But earlier wars involved  
huge procurements of tanks and boots; this one doesn't. Much of the  
rise in military spending in the Bush years has gone to low- 
multiplier R&D and contractors, not high-multiplier durable goods.  
And they didn't help drive the oil price up over $100.

Doug