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Krugman Wishes He Were Wrong Amid EU Austerity Backlash May 3, 2012

Posted by proeconomia in Fiscal policy, Main, Monetary policy, On the crisis, Opinion.
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OK, here are two things: one is an article from Bloomberg with the above title, and yes you should be reading all sides (again and again until you get to know them well!); two, from an email of our colleague Panos Evangelopoulos with a neat article from Edmund Phelps @ Columbia from a site worth visiting. In the second piece there are a lot of arguments against modern Keynesians (alas, not again Keynes and his theory though but only about its current applicability) and they way the would like to do things. I invite you to read both pieces and visit the Center on Capitalism and Society – I am putting it also on the links list. Here is a nice excerpt from the second piece:

“I have to say that the Keynesians have not been good disciples of Keynes. I am sure he would not have said about today’s situation, with its towering debt and entitlements, that we can spend our way to the level of prosperity you want by the device of tax cuts to stimulate consumer demand on top of the huge stimulus from the 66 trillion. He would have been worried about the effect of all this on entrepreneurial spirits. He warned Franklin Roosevelt in 1934 not to endanger “confidence.” Two months before he died, in 1945, he complained in the Economic Journal that economics had “gone silly and sour.”

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1. Constantina - May 4, 2012

Very interesting the articles indeed. It is so fascinating to watch the ever lasting debate between the two main opinions. Yet, the experience shows that tight austerity measures without growth programs taking place, drain the market and deepen the crisis. Of course, regarding the Greek case, things are not that simple since until now most of the main reforms have not taken place, but what about the rest of Europe? Let’s remember the Netherlands, the proponents of the strict 3% deficit and its consequences… what has happened to it now?


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