Paul Krugman continues his lobby for low interest rates. He says, “[U]nemployment is high, inflation is low, and the Fed has no business raising rates any time soon.” Today, the issue was raised as Matthew Yglesias responded to a Washington Post editorial by David Ignatius, who worries that the Fed may not garner the political support to raise rates. You can almost hear Yglesias shouting through the screen: “It would be good for the Fed to have public support in combating inflation if combating inflation were a good idea.” Krugman takes a more subdued approach, citing the Taylor Rule, which relates interest rates to unemployment and inflation. According to that rule, the interest rate should be at minus 6.7, given the high unemployment. Krugman’s answer isn’t surprising given that he has championed the low-rate cause for quite some time. 

Barry Ritholtz picked up on the warning signs of the faltering commercial real estate market months ago. Today, he posts John Carney’s response to this question: Who is to blame for the commercial real estate disaster? Though Ritholtz is not “on board with everything [Carney] trashes,” he does say it’s “worth checking out.” Carney spreads the blame around, calling out the government, central banks, and investors. But Ritholtz especially takes note of the lightweight requirements on commercial mortgage-backed securities and the rising volume of smaller regional banks involved in “riskier [commercial real estate] activities.”

In today’s two-part discussion, Felix Salmon weighs the pros and cons of privileging corporate debt by taxing interest payments. This morning, he gives it up to James Surowiecki, who says, “A debt-ridden economy is inherently more fragile and more volatile.” So why not tax? One reason that Salmon notes upfront is that “it’s politically impossible.” But Salmon presses on, and in his second post on the topic, he offers three more possible answers. First, “the corporate income tax is a tax on income, and a tax on interest payments isn’t a tax on income, so you can’t expand corporate income taxes to include a tax on interest payments.” Second, a commenter makes the point that it would be impossible to craft such a law without loopholes. And, third, he cites Megan McArdle, who argues that debt is a legitimate business expense for some companies. All in all, it sounds like Salmon is in favor of such a measure. He says:

We want to move away from over-reliance on debt finance, and towards a world where equity finance becomes much more common and much more boring. If investors want to leverage corporate profits with debt they can do so themselves, by buying stock on margin. But let’s not implement the leverage at the corporate level, where it’s imposed on even the most risk-averse equity investor.

Brad Delong shows readers an e-mail that he received today about power outages in Venezuela. In response to the enraged e-mailer, Delong simply says this: “Electricity shortages in a country whose sole export is energy are truly a miraculous thing. It takes a very special government to produce them.”