What’s good for the goose . . .
Most people look at world events from a “common sense” perspective. For instance, most see the eurozone crisis as a sort of morality tale. Those profligate southern Europeans took on too much debt, and now they are paying the price.
The Keynesians would say the real problem is that the euro system was poorly designed and as a result AD crashed causing a big recession. Individual countries weren’t able to devalue their way out of the crisis.
But they’ll have a hard time winning that argument, as the Very Serious People look at the world from a common sense perspective. And it sure looks like a excess debt morality play.
So I sympathize with the Keynesians, but only a tiny bit. You see I can’t help recalling their attitude in 2008. It was full of gloating at the failure of the deregulated, Chicago School, neoliberal, laissez-faire, Anglo-Saxon capitalism model. Of course the real problem was a big fall in NGDP, caused by a failure in our inflation targeting, let bygones-be-bygones, backward-looking monetary regime. The one that uses the Keynesian policy instrument. You know, the instrument that works fine except when most needed, when rates fall to zero. Interest rates. But it didn’t look that way—it looked like wildcat banking run amok.
So that’s why I have only a little bit of sympathy. But at least I’m not going to gloat about the failure of the over-regulated, left-wing, big government, statist, European welfare state. I’m not that mean. And it would not be accurate.
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10. June 2013 at 16:49
That “gloating” perspective still seems more “plausible” to most people. For instance, here is Martin Wolf on the Fed: http://www.ft.com/intl/cms/s/0/6f79a298-ca00-11e2-8f55-00144feab7de.html
10. June 2013 at 16:52
“excess debt morality”
https://pbs.twimg.com/media/BJRC9FQCUAAt98U.jpg:large
For me there’s a case for expansionary austerity and deregulation of the markets (even Krugman agree on deregulation needed in europe).
10. June 2013 at 16:52
“excess debt morality”
https://pbs.twimg.com/media/BJRC9FQCUAAt98U.jpg:large
For me there’s a case for expansionary austerity and deregulation of the markets (even Krugman agree on deregulation needed in europe).
10. June 2013 at 17:03
Monetary policy trumps all ‘excuses’!
http://thefaintofheart.wordpress.com/2013/06/10/krugman-and-the-austerians-a-tiresome-and-misguided-debate/
10. June 2013 at 17:06
And Mark Sadowski argues that Koo´s “It´s all in the Balance Sheet” is pure “BS”:
http://thefaintofheart.wordpress.com/2013/06/10/richard-koo-also-misinterprets-japans-lost-decades-a-guest-post-by-mark-sadowski/
10. June 2013 at 17:12
Saturos, Yup, liberals gloat about America, and conservatives gloat about Europe. And they are both wrong.
Marcos, That’s right.
Marcus, Yes, and I need to link to that Sadowski piece.
10. June 2013 at 18:57
They can have their welfare state at the cost of lower FX and higher inflation. Standard of living ultimately catches up, or the soviet union would have been paradise. Eurozone monetary policy is about federal centralization. So is US monetary policy: federal centralization. Tight everywhere. “academic” economists irregardless.
10. June 2013 at 19:51
Let’s see, liberal and conservative Phd economists can agree on nothing—except that Market Monetarism will not work. Oh, great.
I guess you have to have a Phd to think that having extra money floating around, when they are huge amounts of slack in the economy and inflation is dead, will not work. Why not?
I have a long, long story about $36 million recently paid for an Andy Warhol “painting.”
Why “painting’?
You see, Warhol did not paint his “paintings.” He commissioned outside studios to render his works. So a studio would make, say, 30 of his “paintings” and maybe make a couple extra. Small batch production of paintings (not prints, btw.)
Now the bundle of 30 would go back to Warhol, and he would sign them, and authorize them, and they would be “real” Warhol paintings.The problem is, sometimes the studio would make a couple extra Warhol paintings. Same process, same batch.
Sometimes these extra, unauthorized paintings surface. They can be worth $36 million if authenticated by the Warhol Foundation, or nothing or a lot less, if not. This is th private sector at work, btw. No government intrusion.
So what makes a Warhol painting valuable? People agree that it is valuable.
Like money. Get it?
10. June 2013 at 20:37
Here’s a graph from the WSJ showing the austerity in the US over the last four years:
http://www.ritholtz.com/blog/wp-content/uploads/2013/06/tug-of-war.jpg
Offset at work?
11. June 2013 at 03:25
[…] See full story on themoneyillusion.com […]
11. June 2013 at 05:06
Part II of Mark Sadowski´s take on Koo is up:
http://thefaintofheart.wordpress.com/2013/06/11/richard-koo-also-misinterprets-japans-lost-decades-part-ii-a-guest-post-by-mark-sadowski/
11. June 2013 at 05:16
Ben, Love the Warhol example. (And the fact that people care so much about the issue.)
Garrett, Yes, and if you add in taxes the austerity this year was much greater.
Thanks Marcus.