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

[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.

[nairiporter]

An economy cannot sustain itself in the long run if it relies solely on the tertiary sector.

[nairiporter]

Two things. Lack of significant economic turmoil, particularly at times of adversity. And ability to recover without much help from outside, in case of such turmoil. Reference: Germany.