Paul Krugman’s Thursday Buzzkill

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Paul-Krugman-with-Cat1greece:spain

Paul Krugman and friend (top) and Greece spending Vs Spanish spend

Ahead of a possible Greek deal/exit.

Nobel winning economist Paul Krugman writes:

How did we get to this point?

Nothing fills me with quite as much despair as the persistence of the story line that it’s all about continuing Greek fecklessness, that the Greeks haven’t done anything.

In fact, Greece has imposed almost inconceivable pain on itself. Above is a comparison between Greece and Spain, the current favorite son of the austerity camp (although the Spaniards themselves aren’t impressed)

The problem has been that severe spending cuts in an economy with no independent monetary policy and no ability to devalue lead to severe economic contraction, which in turn means that a large part of what’s gained fiscally at the front end gets lost via reduced revenue.

This isn’t the fault of the Greeks, it’s basically a design flaw in the euro itself.

Thinking About the All Too Thinkable (Paul Krugman, New York Times)

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16 thoughts on “Paul Krugman’s Thursday Buzzkill

  1. Miko

    Interesting to see Greece recovering until Syriazia got in….
    If a country does not play by basic rules such as collecting tax or delivering real economic statistics no amount of money will be sufficient to fix it…

    1. Eliot Rosewater

      Miko, I can see a sharp dip in 2013 on that graph. Remind us when Syriza got into power?

    2. collynomial

      I’m not sure you are reading that chart correctly. What it shows is that Greece was starting to spend more before Syriazia got in. Since 2013 expenditure has been cut, that is austerity increased in real terms since 2013.

      I think it is a little one dimensional by Krugman to use a single chart to make this point (look at me criticising a Nobel prize winner).

      I don’t think Spain is being heralded as a poster child for austerity either, rather for making reforms. Some of these reforms were related to unencumbering the labour market and restructuring pensions and taxes.

      1. Eliot Rosewater

        @Collynomial, not sure if your comment was directed at me, but the graph doesn’t really show anything regarding when they took power, as it cuts off before 2015, but it does show that the previous government has cut spending drastically. From what I’ve heard Syriza has focused on increasing tax payment which is surely something (most) on the right and the left would be fully supportive of.

  2. Jack Ascinine

    Bollox. Greeks don’t want to pay taxes, retire too early, and have a huge public debt bill.

  3. Jack Ascinine

    And that dude thinks about money while stroking a cat…. Something disturbing about that.

  4. Stavros in Athens

    Curious to know where that photo came from – clear indication is to portray PG as a bit of an idiot (which he’s not).

  5. Truth in the News

    The game is up for the Euro and Greece, Spain and Portugal will in time finish
    it off, the reality is that the IMF are providing liquidity to bale out Angela Merkels
    Germany as they lent money that they had no prospect of being repayed as the
    economies of these nations do not pocess the growth or the financial muscle
    what we are witnessing now is demise the German plan to take over Europe
    with pen and ink instead of tanks and lead which failed too….Schadenfreude
    with an ironic twist
    Paul Krugman is dead on, he did’t get a Nobel Prize for nothing.

    1. dereviled

      Sveriges Riksbank Prize in Economic Sciences* in Memory of Alfred Nobel
      *not an actual science

      1. Truth in the News

        Prof Paul Krugman was awarded the 2008 Nobel Memorial Prize
        in Economic Sciences for his work on “New Trade Theory”.

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