Tuesday, December 06, 2011

Another Eurozone Post??!

I just posted this morning about how the former ECB President was dreaming if he expected austerity to be expansionary:
I guess he (Michael Boskin) can't be too blunt about the former ECB President. How can fiscal consolidation be expansionary? The private sector is not spending, the government is not spending, the consumers have no jobs, so they have no money to spend. So who is spending? If no one is spending, how can the economy expand? What is this confidence fairy thing?
Now, if you think I am talking junk, here is Joseph Stiglitz on the issue:
Public-sector cutbacks today do not solve the problem of yesterday’s profligacy; they simply push economies into deeper recessions. Europe’s leaders know this. They know that growth is needed. But, rather than deal with today’s problems and find a formula for growth, they prefer to deliver homilies about what some previous government should have done. This may be satisfying for the sermonizer, but it won’t solve Europe’s problems – and it won’t save the euro.
I am not in the habit of name-dropping but it would be foolish not to leverage on the comments of a Nobel Laureate.

 Source: Project Syndicate

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