Saturday, February 25, 2012

European Crisis Realities - Krugman

Classic Krugman simpifying the European economic problems {paraphrased by me with a little spin to fit our problem here at home, too).

"You can slash the welfare state all you want (and the right wants to slash it down to bathtub-drowning size), but this has very little to do with export competitiveness. You can pursue crippling fiscal austerity (belt tightening), but this improves the external balance -- only by driving down the economy and hence import demand -- with maybe, maybe, a gradual “internal devaluation” caused by high unemployment (where we are now).

We’re basically looking at a balance of payments problem, in which capital flooded in (spelled "foreign investments") leading to overvaluation. It’s the main way one should think about where we are."

Me again. Our so called "leaders" should realize that what we really need is a general REFLATION. Krugman again, "So let’s hope that they get this, and also give each of us a pony."

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