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Krugman Wishes He Were Wrong Amid EU Austerity Backlash
Europe’s shifting emphasis from enforcing austerity to seeking economic growth marks a hollow victory for Nobel laureate Paul Krugman.
“I wish I’d been wrong for the sake of the world,” Krugman said in an interview with Bloomberg Television’s Carol Massar. “You can see that there has been a definite shift in opinion.”
The euro area’s push to revive confidence in its economy and financial markets by attacking budget deficits will be challenged at the ballot boxes of France and Greece on May 6 as the region’s economy skids toward its second recession in three years and unemployment nears 11 percent.
And the money to continue Europes deficit spending was going to come from where? Krugman? Are you willing to lend Greece more money? I didnt think so. Yet you want the money magically appear from....somewhere.After 2-3 years of "austerity" programs, Europeans are starting to look at their economies in a different manner.
'Somehow', in some mysterious fashion, the "failed" stimulus programs advocated and pushed for by the Administration have kept the US from falling back into recession. Now that the stimulus funding has ended, we are starting to see the economy here beginning to slow. Naturally those of the Austrian school think that this proves their point that government should spend even less.
It was going to have to come from the EU central bank, which could fund it via bonds...just like we do. Since Greece is on the Euro, they could not raise the funding themselves.And the money to continue Europes deficit spending was going to come from where? Krugman? Are you willing to lend Greece more money? I didnt think so. Yet you want the money magically appear from....somewhere.
No, our economy is not an addict, it was a heart attack victim. The stimulus was a shock to keep the heart beating, but the rest of the care needed has been lacking, and we might be getting sick again, the first treatment did not get enough or keep enough employed.As for the US, your post simply highlights the ultimate failure of Obamas policies. We now have an economy that is addicted to stimulus. And like any addict, the US is now experiencing withdrawl as the latest fix wears off. Whats your solution? Another fix, then another and another after that. Deficit spending is simply borrowing from the future.
LOL...yeah, about that inflation....it isn't happening...and borrowing leads to austerity? No, borrowing leads to repayment in the future, where mild inflation causes the past borrowing to decrease in amount on top of the fact that borrowing now has less that zero interests costs.For Europe, that future has arrived and it isnt very promising. For the US, borrowing can only lead to austerity or inflation. People really need to stop pretending that our current policy is without consequence.
Why should the rest of the EU pay for letting Greece stay afloat? But it was never going to happen, because Greece was supposed to not default. It is also against EU laws.It was going to have to come from the EU central bank, which could fund it via bonds...just like we do. Since Greece is on the Euro, they could not raise the funding themselves.
It doesn't work that way, because cutting after a recession is even harder, because you are not forced to. Just look at Japan. Hence, the country will keep running deficits till next crisis. During the next crisis, no one is going to lend you money, and that is when you become like Greece. Instead of doing mild cuts, then you have to do massive cuts over a very short timespan, and the economy collapses.LOL...yeah, about that inflation....it isn't happening...and borrowing leads to austerity? No, borrowing leads to repayment in the future, where mild inflation causes the past borrowing to decrease in amount on top of the fact that borrowing now has less that zero interests costs.
Where are you getting that Ireland is "doing well"? By what measure?Krugman is a liar. I still don't understand why people use him as a reference, especially here. This is not Democratic Underground.
Actually, Greece didn't do any austerity before they run out of money in 2010. They would love to keep going, but who are going to lend them. Even with plenty of money, Greece would just muddle through and there would be no hope of them paying back. However, Germany has implemented a pretty tough austerity program, and they are not doing badly at all. Ireland was in a much worse situation than Greece, they had a very tough austerity program, and they are doing well.
Ireland Triumphs!
Or, maybe not.
There’s a visible push to claim that recent Irish experience — somewhat better-than-expected growth in the second quarter, rising exports — vindicates austerity policies. Here’s a new piece on export growth, trumpeting a rise in pharma exports.
So, some cold water. First of all, eventual recovery after years of Depression-level unemployment is a strange definition of success. But there’s also a specifically Irish twist. Pharma accounts for a large share of Irish exports — but it makes a much smaller contribution to the Irish economy. Partly that’s because pharma uses a lot of imported inputs, so that it has relatively low domestic content. Partly that’s because pharma is very capital-intensive, employing very few people — and the capital is foreign owned, so that the contribution to Gross National Product, which deducts income paid to foreigners, is smaller than the contribution to Gross Domestic Product, which doesn’t. Indeed, Ireland is one of those countries where you really want to track GNP rather than GDP to get a sense of how the country is doing.
And here’s how it’s doing:
http://krugman.blogs.nytimes.com/2011/09/30/ireland-triumphs/
The problem with Greece goes back much further, they did not have an economy that really allowed them to be a full member in the Euro along with their inability to collect taxes in a sufficient manner, but the bigger problem was the speculating and over-valuation of Greek properties/businesses. Now they are defaulting from the world-wide recession. It is up to the EU whether it wants to lose a member state (and I think that would be a good thing for Greece to do, they need to regain control over their own currency).Cam said:There is no connection. The problem is, Greece is like a drug addict. They are addicted on credit. They don't want to reform, and corruption and tax evasion is widespread. EU officals told us first there was no problem in Greece, then that a bailout will solve all problems, then a second bailout, but they won't default, then they defaulted, but pretended it wasn't a default. In return Greece were supposed to do reforms they had no interest in doing. The expectations were way off, and the market is terrified of Greece right now. Would you put money in a Greek bank? Would you lend them money? Would you start up a business? There is no trust. If the EU hadn't sugar-coated the situation, and let Greece find solutions to their problems on their own, then Greece would probably be out of the recession right now.
Ah, the confidence fairy tale.Cam said:The problems in EU is due to lack of trust, and setting wrong expectations. It is not due to austerity.
I see. And who is going to buy those bonds and at what rate and at what cost to the value of the Euro? Plus you seem to be pretending that Greecesw problem is something other than its inability to amke payments on the loans it has already received. You will have to explain to me how it is that the solution for a country unable to pay its debts is to increase its debt burden.It was going to have to come from the EU central bank, which could fund it via bonds...just like we do. Since Greece is on the Euro, they could not raise the funding themselves.
The recession ended 3 years ago. What you are suggesting is endless stimulus/government spending.No, our economy is not an addict, it was a heart attack victim. The stimulus was a shock to keep the heart beating, but the rest of the care needed has been lacking, and we might be getting sick again, the first treatment did not get enough or keep enough employed.
Sure, borrowing now has its advantages. The trouble is, rates will not remain this low forever and everything borrowed today has to eventually be rolled over at higher rates. What you are saying is that inflation will helop you cheat your lenders out of recovering the full value of their loans. What you havent taken into consideration is that lenders understand this. That is why rates will rise.LOL...yeah, about that inflation....it isn't happening...and borrowing leads to austerity? No, borrowing leads to repayment in the future, where mild inflation causes the past borrowing to decrease in amount on top of the fact that borrowing now has less that zero interests costs.
Come on guys...lets get honest...No one is more against corporate pigs at the trough that lpast...but lets be fair and honest.
We need an Austerity program...we need "REASONABLE" entitlement reform...and we need the rich to "ACTUALLY" pay something near what they should have been all along and have not.
What we have instead of "REASON" is this assinine Teaparty far right group of rich brats that think they are entitled to EVERYTHING now instead of most and that they are going to take whats left from a "SMALL" middle class they created out of greed...running to china.
Corporations put all these americans out of work and not paying taxs all on thier OWN....Id bet if you count the unemployed that total number would pale compared to how many job have been created in china since the first one....THE TEAPARTY and the super conservatives on here refuse to acknowledge that.
If they wont do all 3 reasonably...Austerity, Entitlement Reform and Rich pay a fair share....then im voting for Whoever says anything I want to hear thats just good for me....like everyone else
Very strange then that Greece went belly-up. For years Greece essentially followed Krugman's ideas (austerity being for suckers) and wound up bankrupt and panhandling in the capitals of Europe.After 2-3 years of "austerity" programs, Europeans are starting to look at their economies in a different manner.
'Somehow', in some mysterious fashion, the "failed" stimulus programs advocated and pushed for by the Administration have kept the US from falling back into recession. Now that the stimulus funding has ended, we are starting to see the economy here beginning to slow. Naturally those of the Austrian school think that this proves their point that government should spend even less.
Krugman is a liar. I still don't understand why people use him as a reference, especially here. This is not Democratic Underground.
Actually, Greece didn't do any austerity before they run out of money in 2010. They would love to keep going, but who are going to lend them. Even with plenty of money, Greece would just muddle through and there would be no hope of them paying back. However, Germany has implemented a pretty tough austerity program, and they are not doing badly at all. Ireland was in a much worse situation than Greece, they had a very tough austerity program, and they are doing well.
There is no connection. The problem is, Greece is like a drug addict. They are addicted on credit. They don't want to reform, and corruption and tax evasion is widespread. EU officals told us first there was no problem in Greece, then that a bailout will solve all problems, then a second bailout, but they won't default, then they defaulted, but pretended it wasn't a default. In return Greece were supposed to do reforms they had no interest in doing. The expectations were way off, and the market is terrified of Greece right now. Would you put money in a Greek bank? Would you lend them money? Would you start up a business? There is no trust. If the EU hadn't sugar-coated the situation, and let Greece find solutions to their problems on their own, then Greece would probably be out of the recession right now.
The problems in EU is due to lack of trust, and setting wrong expectations. It is not due to austerity.
Greece cooked the books because they were broke, they were not broke because they cooked the books. That's is an inane argument. I understand why your article selected Portugal rather than Greece. Greece would have squarely invalidated his conclusions. The failure was lack of austerity of the parts of successive Greek governments which were more concerned to clinging to power than confronting strong unions and a bloated public sector.And you got your economics degree from where? Because you're going to have to do a LOT more work than this to try to outdo Krugman.
Greece cooked their books, which is why their problem is by far the worst. But austerity has stalled out their economy entirely. The same thing is happening in Spain, which is the Eurozone's third biggest economy and could be a MASSIVE problem for the world economy if they collapse. The only way out of recession is spending.
History and present conditions prove that austerity is a failure during a recession.
Austerity's Greatest Failure - Matthew O'Brien - Business - The Atlantic
“It took 30 years of frivolous public spending to bring the country to a debt-to-GDP ratio of 120%. Two years of severe austerity brought debt to 168% of GDP. Obviously the medicine didn’t work.”
(from this article)
There's ample evidence that austerity is a failure as a policy.
The EUCB would have to determine the rate, the world market will decide if the bonds are good or not....free market...that is how it works...right?I see. And who is going to buy those bonds and at what rate and at what cost to the value of the Euro? Plus you seem to be pretending that Greecesw problem is something other than its inability to amke payments on the loans it has already received. You will have to explain to me how it is that the solution for a country unable to pay its debts is to increase its debt burden.
The official NBER recession is over, the effects continue...it is called "job losses", look it up sometime, google it, i'm sure there is something out there about it.The recession ended 3 years ago. What you are suggesting is endless stimulus/government spending.
I'm sorry, if you don't know how bonds work, this is pointless to continue, on top of this faked ignorance about continuing recessionary effects.Sure, borrowing now has its advantages. The trouble is, rates will not remain this low forever and everything borrowed today has to eventually be rolled over at higher rates. What you are saying is that inflation will helop you cheat your lenders out of recovering the full value of their loans. What you havent taken into consideration is that lenders understand this. That is why rates will rise.
Greece cooked their books, which is why their problem is by far the worst. But austerity has stalled out their economy entirely.
That is not his argument, you created a straw argument, very poorly at that. Try again.Greece cooked the books because they were broke, they were not broke because they cooked the books. That's is an inane argument. I understand why your article selected Portugal rather than Greece. Greece would have squarely invalidated his conclusions. The failure was lack of austerity of the parts of successive Greek governments which were more concerned to clinging to power than confronting strong unions and a bloated public sector.
You are right about that at least. I wasnt going to waste my time responding to you but I had some extra time on my hands. My bad.this is pointless to continue
It is a very poor argument, but still an argument.Greece cooked their books, which is why their problem is by far the worst.
Where are you getting that Ireland is "doing well"? By what measure?
It is a very poor argument, but still an argument.
Greece cooked the books because they were broke, they were not broke because they cooked the books. That's is an inane argument. I understand why your article selected Portugal rather than Greece. Greece would have squarely invalidated his conclusions. The failure was lack of austerity of the parts of successive Greek governments which were more concerned to clinging to power than confronting strong unions and a bloated public sector.
I see. And who is going to buy those bonds and at what rate and at what cost to the value of the Euro?
Plus you seem to be pretending that Greecesw problem is something other than its inability to amke payments on the loans it has already received. You will have to explain to me how it is that the solution for a country unable to pay its debts is to increase its debt burden.
The recession ended 3 years ago.
Sure, borrowing now has its advantages. The trouble is, rates will not remain this low forever and everything borrowed today has to eventually be rolled over at higher rates. What you are saying is that inflation will helop you cheat your lenders out of recovering the full value of their loans. What you havent taken into consideration is that lenders understand this. That is why rates will rise.
the only problem with this is that governments - well at least that of the USA - continue the deficit spending once the economy reboundsWait...so you think austerity is making things better for Greece? Spain? Ireland is the closest thing to a success, but they've only just experienced their first quarter of growth, while we here in the US have had 11 straight quarters of growth. The UK's austerity program has resulted in 4 of their last 6 quarters shrinking and their highest quarter of growth post-recession is a mere 1/3 of what our best quarter has been.
It hasn't been a success anywhere. It results in slow growth or (worse) a return to recession, which (as we know) only makes debt grow due to lower tax receipts. That's why debt is growing in the countries who have instituted these policies instead of shrinking. Stimulate first; then deal with the debt when the economy has recovered. There's a reason why it's been done that way for a long time; because it works.
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