Krugman bemoans the way standard economics has been ignored in the EU since the crisis started.
"When the financial crisis struck, there were widespread calls for new economic thinking; surely, many believed, the drastic events showed that there was something terribly flawed about economic analysis. In fact, however, the crisis itself, and even more the developments that followed, have been anything but puzzling. Again and again, things have played out pretty much the way you would have expected if you (a) understood and took seriously basic Hicks/Keynes macroeconomics and (b) paid attention to the relevant economic history."
"The problem has been that all too many policymakers and pundits were and are either ignorant of these basics or determined to ignore them — or, putting these together, determined to be ignorant. Year after year, as we reproduce the 1930s, the usual suspects have been obsessed with fears of a return to the 1970s; as we become Japan they worry that we’re about to become Zimbabwe; and so on."
http://krugman.blogs.nytimes.com/2015/07/15/history-lessons-for-euro-debtors/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body
Let's face it though: do you actually think that the Eurocrats have an economic model of any kind? All they have is Germany's rejection of Anglo-Saxon economics in favor of German economics-ie, the 'model' of the Bundesbank.
http://diaryofarepublicanhater.blogspot.com/2015/07/trying-to-discuss-economics-with.html
Krugman's main point of his post is that Greece has had the 'British plan' of debt reduction foisted on it.
"on the issue of the moment, there are actually quite good historical models for what Greece has been trying to do — cope with a large debt overhang via austerity policy. Britain, after all, emerged from each world war with very high public debt. Its debt burden just after World War I was, as a share of GDP, roughly comparable to Greece’s in 2009; its burden after World War II was twice as high."
"What happened? Almost three years have passed since the IMF — yes, the IMF — pointed out that Britain between the wars tried a strategy much like that of European debtors: hard money plus austerity. Britain was incredibly determined, running huge primary surpluses as a share of GDP; but it failed to make a significant dent in the debt burden, because deflation ate up any gains from fiscal austerity"
"The story after World War II was very different. While Britain did run primary surpluses, they were for the most part considerably smaller than after World War I. But the debt ratio fell dramatically, because of the combination of inflation and financial repression that helped keep interest rates low:"
"The secret of Britain’s success the second time around? After World War I it returned to the gold standard; while it did eventually let the pound fall, at that point this mainly was just sufficient to offset global deflation in the face of the Great Depression. After World War II Britain faced a world economy with rising prices, but nonetheless sharply devalued the pound in 1949"
The case for Grexit is self-evident:
"Now what? If Greece still had its own currency, the case for devaluation would be completely overwhelming at this point. What this means, in turn, is that everything — the ongoing economic disaster in Greece, the bitter divisions within the euro area, the perplexity of even the best intentioned policymakers — flows from the supposedly insuperable technical difficulties of going off the euro."
I also wrote about this myself last week.
http://diaryofarepublicanhater.blogspot.com/2015/07/two-ways-to-pay-off-your-debt-british.html
http://diaryofarepublicanhater.blogspot.com/2015/07/german-pomposity-towards-greece-what.html
Actually the classic case of a Quixotic British quest to pay down its debt at all costs came in the almost 100 years between the end of the Napleonic wars and WWI. For almost 100 years Britain sacrificed its domestic economy to pay off war debt.
The Germans on the other hand have never paid their debts in modern history. Not once.
"My book tells of the history of income and assets , including the public. What struck me in writing: Germany really is the prime example of a country that has never repaid its government debt in history . Neither after the First nor the Second World War. There was another pay about after the Franco-German War of 1870, when it called for a high payment of France and they got it. For the French state was suffering then for decades under the debt. In fact, the history of public debt irony. They rarely follow our ideas of order and justice."
"Just such a state is Germany. But slowly: The story teaches us two options for a highly indebted country to settle its arrears. One has fooled the British Empire in the 19th century after the Napoleonic Wars expensive: It's slow method, which today also recommends Greece. The UK division at that time the debt through rigorous financial management from - although it worked, but took extremely long. Over 100 years the British relatives two to three percent of its economic output on the debt, spending more than they for schools and education.That must not be and should not be today. For the second method is much faster.Germany has it tried in the 20th century. Essentially, it consists of three components: inflation, a special tax on private assets and liabilities sections."
If you want to understand why the decline of the British Empire was so steep and cruel at the beginning of the 20th century this willful impoverishment is a good place to start.
"When the financial crisis struck, there were widespread calls for new economic thinking; surely, many believed, the drastic events showed that there was something terribly flawed about economic analysis. In fact, however, the crisis itself, and even more the developments that followed, have been anything but puzzling. Again and again, things have played out pretty much the way you would have expected if you (a) understood and took seriously basic Hicks/Keynes macroeconomics and (b) paid attention to the relevant economic history."
"The problem has been that all too many policymakers and pundits were and are either ignorant of these basics or determined to ignore them — or, putting these together, determined to be ignorant. Year after year, as we reproduce the 1930s, the usual suspects have been obsessed with fears of a return to the 1970s; as we become Japan they worry that we’re about to become Zimbabwe; and so on."
http://krugman.blogs.nytimes.com/2015/07/15/history-lessons-for-euro-debtors/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body
Let's face it though: do you actually think that the Eurocrats have an economic model of any kind? All they have is Germany's rejection of Anglo-Saxon economics in favor of German economics-ie, the 'model' of the Bundesbank.
http://diaryofarepublicanhater.blogspot.com/2015/07/trying-to-discuss-economics-with.html
Krugman's main point of his post is that Greece has had the 'British plan' of debt reduction foisted on it.
"on the issue of the moment, there are actually quite good historical models for what Greece has been trying to do — cope with a large debt overhang via austerity policy. Britain, after all, emerged from each world war with very high public debt. Its debt burden just after World War I was, as a share of GDP, roughly comparable to Greece’s in 2009; its burden after World War II was twice as high."
"What happened? Almost three years have passed since the IMF — yes, the IMF — pointed out that Britain between the wars tried a strategy much like that of European debtors: hard money plus austerity. Britain was incredibly determined, running huge primary surpluses as a share of GDP; but it failed to make a significant dent in the debt burden, because deflation ate up any gains from fiscal austerity"
"The story after World War II was very different. While Britain did run primary surpluses, they were for the most part considerably smaller than after World War I. But the debt ratio fell dramatically, because of the combination of inflation and financial repression that helped keep interest rates low:"
"The secret of Britain’s success the second time around? After World War I it returned to the gold standard; while it did eventually let the pound fall, at that point this mainly was just sufficient to offset global deflation in the face of the Great Depression. After World War II Britain faced a world economy with rising prices, but nonetheless sharply devalued the pound in 1949"
The case for Grexit is self-evident:
"Now what? If Greece still had its own currency, the case for devaluation would be completely overwhelming at this point. What this means, in turn, is that everything — the ongoing economic disaster in Greece, the bitter divisions within the euro area, the perplexity of even the best intentioned policymakers — flows from the supposedly insuperable technical difficulties of going off the euro."
I also wrote about this myself last week.
http://diaryofarepublicanhater.blogspot.com/2015/07/two-ways-to-pay-off-your-debt-british.html
http://diaryofarepublicanhater.blogspot.com/2015/07/german-pomposity-towards-greece-what.html
Actually the classic case of a Quixotic British quest to pay down its debt at all costs came in the almost 100 years between the end of the Napleonic wars and WWI. For almost 100 years Britain sacrificed its domestic economy to pay off war debt.
The Germans on the other hand have never paid their debts in modern history. Not once.
"My book tells of the history of income and assets , including the public. What struck me in writing: Germany really is the prime example of a country that has never repaid its government debt in history . Neither after the First nor the Second World War. There was another pay about after the Franco-German War of 1870, when it called for a high payment of France and they got it. For the French state was suffering then for decades under the debt. In fact, the history of public debt irony. They rarely follow our ideas of order and justice."
"Just such a state is Germany. But slowly: The story teaches us two options for a highly indebted country to settle its arrears. One has fooled the British Empire in the 19th century after the Napoleonic Wars expensive: It's slow method, which today also recommends Greece. The UK division at that time the debt through rigorous financial management from - although it worked, but took extremely long. Over 100 years the British relatives two to three percent of its economic output on the debt, spending more than they for schools and education.That must not be and should not be today. For the second method is much faster.Germany has it tried in the 20th century. Essentially, it consists of three components: inflation, a special tax on private assets and liabilities sections."
If you want to understand why the decline of the British Empire was so steep and cruel at the beginning of the 20th century this willful impoverishment is a good place to start.
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