Austerity Change Needed

Aftermath of the Rogoff and Reinhart; Growth in a Time of Debt is indeed causing a stir. I am hopeful …far from optimistic.

Economists continue to cite the major errors of the R-R study and resulting missteps of the financial leadership. Mitchel got right to the point stating how Elementary misuse of spreadsheet data leaves millions unemployed  Followed by almost everybody who’s anybody in the economics world. The iterations are evolving to sound similar as in what could be, or could have been, if we’d avoided all the cuts this error filled research helped drive.

One catching my eye is yesterday’s print by Paul Krugman, The Non-Secret of our Non-Success.  His usual style parks responsibility squarely. Here a quick look at his data comparing the historical post-recession average with what it is after all the missteps for both the EU and US.

Average vs Current Policy-krugman

Here’s real primary (non-interest) spending, from the IMF’s latest World Economic Outlook, with the blue lines representing the historical average in recessions and aftermath, the red lines representing current policies:

The question remains as to what if anything, the folks in Washington and the IMF do. Will they continue holding to the wrong note and the hope it gets right (like a classic blues progression) or will they understand they have been lied to and misled and make the right choice?  History makes a loud statement. Here’s to hoping legislators are reading and listening.

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