APP - Austerity and Europe

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Paul De Grauwe and the Rehn of Terror

Nobody has taught me as much about the euro crisis as Paul De Grauwe, who brought to the fore a crucial point almost everyone was overlooking: the importance of self-fulfilling debt panics in countries that no longer have their own currencies. Now he has a new paper with Yuemei Ji following up on that insight, and offering yet more evidence of the incredible unwisdom of European economic policy.

What De Grauwe and Ji show is that the rush to austerity in Europe largely reflected the surge in sovereign debt spreads after Greece got in trouble; the bigger the spread, the harsher the austerity. But it turned out that the spreads didn’t reflect underlying fiscal fundamentals. De Grauwe had already made that point by comparing the UK with Spain; similar fiscal outlooks, wildly different borrowing costs. Now he has another piece of evidence, the spectacular decline in spreads once the ECB signaled its willingness to buy sovereign debt if necessary, thereby removing fears of a self-fulfilling liquidity crisis.

Meanwhile, all that austerity has taken a terrible toll. De Grauwe and Ji offer us yet another revealing scatterplot, using announced austerity measures in 2011:

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But hey, Keynesian economics can’t be right, can it?

And they also show that countries pursuing austerity have by and large seen their debt positions worsen:

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But take heart. Olli Rehn of the European Commission, last heard declaring that the big problem with austerity isn’t that it doesn’t work, it’s the fact that economists keep publishing studies showing that it doesn’t work, says that the only thing we have to fear is fear itself:

Mr. Rehn insisted that Europe’s belt-tightening policies were working and would lay the groundwork for a recovery. He said the European economy should expand in 2014, with growth reaching 1.6 percent across the Union and 1.4 percent in the euro area.

“We must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation,” he said in the statement.

Well, that’s all right, then.
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http://krugman.blogs.nytimes.com/2013/02/22/paul-de-grauwe-and-the-rehn-of-terror/
 
I Love America said:
Then they wouldn't be a liberal. To be fair to the liberals, there aren't too many real free market folks. Even among those calling themselves conservatives.
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You're right, to a point. There aren't that many real free market folks, nor real capitalists, for that matter.

Where you mess up in terms of definition is the first sentence. Liberalism isn't statist, nor democratic, nor left wing - you know Kropotkin, Cafiero and Bakunin were all liberals, if you use the actual meaning of the word? I suppose Rand would be as well.
 
Isn't it amazing how our right wing flunkies are STILL advocating austerity measures DESPITE the facts that they don't work?

Yeah, like that stooge Reagan, they just stubbornly and blindly stay the course, while the folks who wipe their feet on them just keep off shoring, out sourcing and off shore accounting.

And as we see in the latest political elections in Europe, the fascists make gains when the failure of austerity is about.
 
Taichiliberal said:
Isn't it amazing how our right wing flunkies are STILL advocating austerity measures DESPITE the facts that they don't work?

Yeah, like that stooge Reagan, they just stubbornly and blindly stay the course, while the folks who wipe their feet on them just keep off shoring, out sourcing and off shore accounting.

And as we see in the latest political elections in Europe, the fascists make gains when the failure of austerity is about.
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Heil Reagan, he's our man, if he can't do it, Boehner can!

hj02.jpg
 
Shy Guy said:
You're right, to a point. There aren't that many real free market folks, nor real capitalists, for that matter.

Where you mess up in terms of definition is the first sentence. Liberalism isn't statist, nor democratic, nor left wing - you know Kropotkin, Cafiero and Bakunin were all liberals, if you use the actual meaning of the word? I suppose Rand would be as well.
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Well, the word "liberal" used to refer to capitalists (market liberals) and people who advocated for limited government and state's rights (classical liberals). Then Wilson came along and it all changed around that time.
 
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