Would you take this bet?
James Forsyth 12:29pm
Paul Krugman, the Nobel prize winning economist, and Greg Mankiw, chair of the Council of Economic Advisors under George W. Bush, are probably the most influential public intellectual economists in America from the left and the right respectively. The two take different-sides on the question of how effective the Obama stimulus will be and Mankiw is now challenging Krugman to put his money where his mouth is:
"Team Obama says that real GDP in 2013 will be 15.6 percent above real GDP in 2008. (That number comes from compounding their predicted growth rates for these five years.) So, Paul, are you willing to wager that the economy will meet or exceed this benchmark? I am not much of a gambler, but that is a bet I would be happy to take the other side of (even as I hope to lose, for the sake of the economy)."
The Obama team has taken some steps to return to ‘honest budgeting’ by cutting the AMT tax out of the Budget numbers and including costs for the wars in Iraq and Afghanistan. But the growth projections are, to be generous, best case scenarios. It seems almost recklessly optimistic to think that US GDP will be 15.6 percent larger in five years time.
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Dirty Euro
March 5th, 2009 2:02pm Report this commentI would take the bet as if he is right then there is hyper inflation so the bet isn't worth any money anyway. While if he is wrong i get money that is worth something.
Hal
March 5th, 2009 8:57pm Report this commentMankiw is being silly, or is it disingenuous? Krugman has argued that the stimulus isn't big enough, and has too much in tax cuts and too little in direct spending. He supports it as more helpful than doing nothing, but I don't believe he ever signed on to everything the Obama Administration is doing -- or failing (so far) to do.
Anyway, who knows what level GDP will be at in 2013?
David Bouvier
March 6th, 2009 4:50pm Report this commentExactly Dirty Euro - the first thing a trader would do is work out if he can turn the bet into an arbitrage situation.
David Bouvier
March 6th, 2009 4:51pm Report this commentThough Dirty Euro - the presence of the word "real" discounts the inflationary component
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