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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: JohnM who wrote (188405)	5/6/2012 3:00:06 PM
From: JohnM	Respond to of 541900

Krugman on the choices Europe now faces. ----------------------------------------------- May 6, 2012, 2:22 pm Ex-President Bling-Bling According to projections. Now what? The basic fact about Europe right now is that the strategy of adjustment through austerity and internal devaluation isn’t working, won’t work, and is rapidly turning into a social and political disaster. The question now is whether there’s a way out that doesn’t involve breaking up the euro. And let’s not call euro breakup unthinkable. It would cause large short-run disruptions, it would be a body blow to the European project, but it would at least offer a path to eventual recovery; Spain would have a chance to restore competitiveness through a devalued peseta that seems infinitely out of reach under current conditions. If you don’t like that outcome, you have to come up with a better one. In a way, the German refrain — we did it, so can they — actually offers a solution, although not in the way the Germans want. For as I emphasized in that post earlier today, that German success story was based on a (modestly) inflationary boom in much of the rest of Europe. Give the peripheral countries a comparably favorable external environment — or actually a more favorable one, since they’re much deeper in the hole — and maybe there is a way to make this work. Let Spain regain competitiveness by inflating more slowly than Germany, rather than by deflating, and this whole thing might, might, become feasible. But this means, yes, overall inflation in the euro area significantly higher than the less than 2 % target. It certainly means a lot higher than the 1.5% the market currently expects. Don’t like that? OK, so no euro. It’s that stark. krugman.blogs.nytimes.com

To: JohnM who wrote (188405)	5/6/2012 3:24:23 PM
From: Dale Baker	Read Replies (1) \| Respond to of 541900

In what universe was Congress ever going to pass a $1.8 trillion package? And since JG and PK have no actual proof that they possess the magic number, how are they so certain it would have been the right number? They correlate the current situation with not following their sacred diktat, when it could be correlated to many other factors in alternate arguments. They sound more than a bit like the High Priests of the Keynesian Faith instead of economists in the real world. That's the danger of the ivory tower and the keyboard, I suppose.