"What does the future hold as Europe slides, ever more hopelessly, towards the abyss? As David Cameron has pointed out, there have been 18 EU summits since he became Prime Minister little more than two years ago, and none of them has produced anything remotely resembling a solution."
"The stand-off got a whole lot worse this week. France and Germany are now in open conflict over the way forward, if indeed there is one. For the UK, already bleeding badly from the after-effects of the financial crisis, the situation could scarcely look more threatening."
"The fiscal consolidation chosen by the Coalition was always likely to have a negative impact on output, at least in the short term. To make it work, the Government needed the following wind of decent growth elsewhere in the world economy. Instead, it’s facing a hurricane. We look set to be broken by the storm."
Well he's certainly right about that, the UK looks broken.
http://www.telegraph.co.uk/finance/economics/8647879/Britain-cant-afford-to-fall-for-the-charms-of-the-false-economics-Messiah-Paul-Krugman.html
"But fear not – salvation is at hand. Next week, there comes to these shores a Messiah, a prophet of great wisdom and understanding whose teachings promise to vanquish despair and “end this depression”. He is Prof Paul Krugman, a superstar polemicist who has been described by The Economist as “the most celebrated economist of his generation”. Actually, “celebrated” is not exactly the right word, for Krugman divides opinion like no other. To his followers, he’s a saint; to his detractors, he’s a false prophet with satanic intent."
"Krugman may appear loud and radical, but he follows a fairly standard Keynesian text. By his own admission, the social cost of the present downturn doesn’t come anywhere close to the Great Depression of the interwar years, or not yet. None the less, there are parallels, and we already meet Keynes’s classic definition of a depression as a “chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse”.
Actually Warner is not entirely right when he claims that Krugman agrees "By his own admission, the social cost of the present downturn doesn't come anywhere close to the Great Depression." He agrees that th is is what he calls the Lesser Depression which is not as bad as what was of course the Greater Depression but he doesn't actually say it comes nowhere close and when he says its not as bad he has the US more in mind than Britain, In fact he's show some graphs which show that the Lesser Depression is hitting Britain a lot harder and it's a lot Greater if you will in the UK than for America and the reason for this is largely the austerity policies of Osbourne-Cameron.
"In such circumstances, monetary policy can help, but only up to a point. In a depression, even those with the balance sheet strength to spend and invest won’t do so, whatever the encouragement offered through ultra-low interest rates. It follows that governments should step into the breach and do the job instead, as a kind of spender of last resort. They can worry about the accumulated debt later, once output has picked up again."
"But haven’t we already tried borrowing to stimulate? And what did it deliver other than fiscal ruin, which in the eurozone periphery is so serious that markets have stopped lending altogether? Krugman has an answer for these questions, too. It’s not the policy that was wrong, merely that the stimulus wasn’t big and sustained enough. As for the eurozone, again, it wasn’t the policy, but the euro. Countries with their own currencies and central banks won’t run into this kind of problem. In extremis, they can always print the money."
"Easy peasy, then. What’s not to like? Well, I’m sorry, but I just don’t buy it. It may or may not be possible for a vast, largely internalised economy such as the US, with its reserve currency status, to run double-digit deficits into the indefinite future without adverse consequences, but for the UK it is a much more questionable policy."
Easy peasy?!! Who's his editor, Sarah Palin? How can Krugman withstand this kind of incisive critique? What's the basis for Mr. Warner's theory that the US might be able to run a double digit deficit but it is "much more questionable" for the UK?
He tries to refute Krugman's point about countries with their own currency with what exactly? What matters then according to Warner is not the ability to print its own money but whether or not this currency is the reserve currency or is "vast" and "largely internalized."
So how do we adjudicate this disagreement between Krugman and Warner? Well for one thing there is no credible economic theory to back up Warner's claim that it makes a difference here about vastness or being a reserve currency. But the proof is ultimately in the pudding-the market clearly believes Krugman and doesn't believe Mr. Warner as British yields are at historical lows just as US yields are.
"As it is, government spending in the UK is already approaching 50 per cent of GDP. Just how high does Prof Krugman propose it should go? It’s all very well to say “jobs first” and worry about the deficit later, but once government spending becomes entrenched, it’s very difficult to get rid of it. Even Reagan and Thatcher struggled to make significant inroads."
Clearly for Warner it's not "all very well" to worry about jobs as he's clearly very unconcerned. But this talk about "even Reagan...." how very droll to use a great British word-I am a British product being born in London and moving here when I was 3.
To the contrary Reagan blew the lid of the deficit to unprecedented absolute levels. Judging by what he did rather than said Reagan didn't care a lick about the deficit as long as it wasn't financed by nonmilitary domestic spending.
After all this Warner concedes that government spending is stimulative:
"In any case, the picture Krugman presents of wrong-headed British austerity is a caricature of the reality, though one admittedly encouraged by the Coalition’s rhetoric. Yesterday’s revised GDP figures, showing that the country is even deeper in recession than we thought, would appear to support the mocking tone in which Krugman condemns the idea of “expansionary austerity”. But where is this austerity? In fact, one of the few positive contributors to output in the last quarter was government spending, which grew by 1.6 per cent. Krugman seems to have forgotten the automatic stabilisers, which because of our welfare state are considerably bigger than in the US. In America, much current UK spending would count as a discretionary fiscal stimulus of the sort End This Depression Now! advocates."
The fact that Britain's larger automatic stabilizers and government spending mitigated the fall in UK GDP the reason not to do more of it is what exactly? Warner now finishes off by appealing to Raghuram Rajan's structural canard:
"As Raghuram Rajan, a former IMF chief economist, has argued, today’s troubles are not simply the result of inadequate demand, but of major changes in the world economy brought about by globalisation. The old monopoly of knowledge and expertise once enjoyed by advanced economies has been swept away. For decades, we compensated for the jobs and income lost to technology and cheaper foreign competition with unaffordable government spending and easy credit. Much of the growth enjoyed in these pre-crisis years was simply unsustainable."
You know the usual "it's all structural" argument so there's nothing that can be done except "structural reforms' which of course means more tax cuts for the rich and tax hikes and spending cuts for everyone else-you know, austerity.
"Krugman may appear loud and radical, but he follows a fairly standard Keynesian text. By his own admission, the social cost of the present downturn doesn’t come anywhere close to the Great Depression of the interwar years, or not yet. None the less, there are parallels, and we already meet Keynes’s classic definition of a depression as a “chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse”.
Actually Warner is not entirely right when he claims that Krugman agrees "By his own admission, the social cost of the present downturn doesn't come anywhere close to the Great Depression." He agrees that th is is what he calls the Lesser Depression which is not as bad as what was of course the Greater Depression but he doesn't actually say it comes nowhere close and when he says its not as bad he has the US more in mind than Britain, In fact he's show some graphs which show that the Lesser Depression is hitting Britain a lot harder and it's a lot Greater if you will in the UK than for America and the reason for this is largely the austerity policies of Osbourne-Cameron.
"In such circumstances, monetary policy can help, but only up to a point. In a depression, even those with the balance sheet strength to spend and invest won’t do so, whatever the encouragement offered through ultra-low interest rates. It follows that governments should step into the breach and do the job instead, as a kind of spender of last resort. They can worry about the accumulated debt later, once output has picked up again."
"But haven’t we already tried borrowing to stimulate? And what did it deliver other than fiscal ruin, which in the eurozone periphery is so serious that markets have stopped lending altogether? Krugman has an answer for these questions, too. It’s not the policy that was wrong, merely that the stimulus wasn’t big and sustained enough. As for the eurozone, again, it wasn’t the policy, but the euro. Countries with their own currencies and central banks won’t run into this kind of problem. In extremis, they can always print the money."
"Easy peasy, then. What’s not to like? Well, I’m sorry, but I just don’t buy it. It may or may not be possible for a vast, largely internalised economy such as the US, with its reserve currency status, to run double-digit deficits into the indefinite future without adverse consequences, but for the UK it is a much more questionable policy."
Easy peasy?!! Who's his editor, Sarah Palin? How can Krugman withstand this kind of incisive critique? What's the basis for Mr. Warner's theory that the US might be able to run a double digit deficit but it is "much more questionable" for the UK?
He tries to refute Krugman's point about countries with their own currency with what exactly? What matters then according to Warner is not the ability to print its own money but whether or not this currency is the reserve currency or is "vast" and "largely internalized."
So how do we adjudicate this disagreement between Krugman and Warner? Well for one thing there is no credible economic theory to back up Warner's claim that it makes a difference here about vastness or being a reserve currency. But the proof is ultimately in the pudding-the market clearly believes Krugman and doesn't believe Mr. Warner as British yields are at historical lows just as US yields are.
"As it is, government spending in the UK is already approaching 50 per cent of GDP. Just how high does Prof Krugman propose it should go? It’s all very well to say “jobs first” and worry about the deficit later, but once government spending becomes entrenched, it’s very difficult to get rid of it. Even Reagan and Thatcher struggled to make significant inroads."
Clearly for Warner it's not "all very well" to worry about jobs as he's clearly very unconcerned. But this talk about "even Reagan...." how very droll to use a great British word-I am a British product being born in London and moving here when I was 3.
To the contrary Reagan blew the lid of the deficit to unprecedented absolute levels. Judging by what he did rather than said Reagan didn't care a lick about the deficit as long as it wasn't financed by nonmilitary domestic spending.
After all this Warner concedes that government spending is stimulative:
"In any case, the picture Krugman presents of wrong-headed British austerity is a caricature of the reality, though one admittedly encouraged by the Coalition’s rhetoric. Yesterday’s revised GDP figures, showing that the country is even deeper in recession than we thought, would appear to support the mocking tone in which Krugman condemns the idea of “expansionary austerity”. But where is this austerity? In fact, one of the few positive contributors to output in the last quarter was government spending, which grew by 1.6 per cent. Krugman seems to have forgotten the automatic stabilisers, which because of our welfare state are considerably bigger than in the US. In America, much current UK spending would count as a discretionary fiscal stimulus of the sort End This Depression Now! advocates."
The fact that Britain's larger automatic stabilizers and government spending mitigated the fall in UK GDP the reason not to do more of it is what exactly? Warner now finishes off by appealing to Raghuram Rajan's structural canard:
"As Raghuram Rajan, a former IMF chief economist, has argued, today’s troubles are not simply the result of inadequate demand, but of major changes in the world economy brought about by globalisation. The old monopoly of knowledge and expertise once enjoyed by advanced economies has been swept away. For decades, we compensated for the jobs and income lost to technology and cheaper foreign competition with unaffordable government spending and easy credit. Much of the growth enjoyed in these pre-crisis years was simply unsustainable."
You know the usual "it's all structural" argument so there's nothing that can be done except "structural reforms' which of course means more tax cuts for the rich and tax hikes and spending cuts for everyone else-you know, austerity.
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