Forget the crisis!, urges Krugman

[ddstory]

http://www.washingtonpost.com/opinions/the-speed-read-paul-krugmans-end-this-depression-now/2012/05/04/gIQALJl31T_story.html

The governments should finally start spending, Nobel laureate in economics Paul Krugman recommends in his new book End This Depression Now, where he sharply criticizes the austerity programs. So let's look a bit closer.

Comments

[hardblue]

. After all, the reader should decide for themselves whoever they're going to trust - Krugman the Keynesian, who never msises a chance to emphasize on the role of the government at times of crisis, or Ludwig Erhard, who, conversely, argues that wealth and prosperity could never originate from the state, and neither from the money-printing machine that is the central bank, but instead it should be earned entirely through personal means and solely thanks to one's individual skills. And that's a debate that will probably never cease.

I am not familiar with Erhard, but I don't see a contradiction in that formulation, and that Krugman would not disagree with the idea that free enterprise should be the primary engine of the economy, but that this is only about the current crisis, and about it being a demand problem.

[abomvubuso]

Erhard was the architect of Germany's miraculous post-war recovery.

[hardblue]

I can appreciate how one might want to emphasize getting the private economy going in those circumstances.

[telemann]

Great post. Krugman's op-ed piece today is a dire warning about the Euro. Apocalypse Fairly Soon.

Suddenly, it has become easy to see how the euro - that grand, flawed experiment in monetary union without political union - could come apart at the seams. We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years. And the costs - both economic and, arguably even more important, political - could be huge. This doesn’t have to happen; the euro (or at least most of it) could still be saved. But this will require that European leaders, especially in Germany and at the European Central Bank, start acting very differently from the way they’ve acted these past few years. They need to stop moralizing and deal with reality; they need to stop temporizing and, for once, get ahead of the curve

[jonathankorman]

That column gives me the Cold Spooky.

[telemann]

I'm sure Mitt will find a way to blame President Obama for it too.

[nairiporter]

Austerity might work only in case there is a real and viable economy, producing real stuff. If there is largely a virtual economy like in Greece's case, austerity would be the final nail in the coffin.

[nairiporter]

I don't know, creating real economy where it does not exist?

When a viable economy already exists, it could pull itself through production, in other words the machine has inertia. When there is none, stopping the wheel from moving means the whole machine stops altogether and it is very difficult to bring it back to motion.

Just a layman's sort of reasoning, if you don't mind.

[dwer]

certainly, Austerity hasn't worked yet, and we know spending will.

[telemann]

Paul Krugman got it right in 2009.Bit by bit we’re getting information on the Obama stimulus plan, enough to start making back-of-the-envelope estimates of impact. The bottom line is this: we’re probably looking at a plan that will shave less than 2 percentage points off the average unemployment rate for the next two years, and possibly quite a lot less. This raises real concerns about whether the incoming administration is lowballing its plans in an attempt to get bipartisan support

[dwer]

Failure of Austerity: Ireland. Spain. Greece.
Success of Spending: US.

[jonathankorman]

Krugman's assessment is scathing - too little, too late, buddies!

In fairness to Krugman, he's not justifying himself with the benefit of hindsight: he said it in public at the time.

[telemann]

Yeah, he's been very consistent on this too.