Nigel Farage was Right

jimdepalermo said:
Actually, most Keynesians, at least those in the US, predicted this from the rollout of the Euro. For decades, Stiglitz and Krugman, for example, have been warning about the impossibility for the Euro to survive a crisis.
Click to expand...


Do you have any texts about this? I have never read anything from them about the Euro from before 2008. Not doubting you, but would love to see what they wrote or said about it before the crisis.
 
camberiu said:
Maybe it was crystal clear to you and to all Austrian economists. But where were the Keynesian and Monetarist "wizards" back in 2006, 2007 or 2008? Where were the "nobel prize winners" such as Krugman or Stiglitz warning about the economic impossibility of the EU? Where where the Ivy League "wizards" of the World Bank, IMF and US Treasury before the "shit hit the fan"? How come it was not obvious to them? How come only the marginalized and mocked Austrians saw this coming?
Click to expand...

I'm personally not an Austrian economist neither am I a Keynesian. As a student of economics I am always on the sidelines, trying to learn from people way more knowledgeable than I, both Austrians and Keynesians.

As for whether NO Keynesian thought it was going to crash. I don't know. Jim's saying that Krugman and Stiglitz warned about it already. Maybe he's right. I don't know who did what and said what and when.

What I do know is that this crisis was bound to happen, whether one likes it or not.
 
camberiu said:
Do you have any texts about this? I have never read anything from them about the Euro from before 2008. Not doubting you, but would love to see what they wrote or said about it before the crisis.
Click to expand...
I'm not finding older Stiglitz material online. Here's a Krugman interview from 1998 http://www.pkarchive.org/global/tag.html. I've read even earlier material that I'll post if I find it online.

His concern in '98 was that the German obsession with inflation would lead to deflation or at least to interest rates too low to allow the ECB any fiscal leverage in the event of a recession. What he didn't mention in this interview were the enormous capital flows from Northern Europe that would overheat the weaker southern economies and leave them uncompetitive.

Here's a secondary reference to a Krugman warning from 1993 that seems right on the money: http://eaces.liuc.it/18242979200802/182429792008050205.pdf

There is also an article from 1991 that I don't find online that describes the potential for asymmetrical capital flows that could cause the exact situation that now threatens Greece and Spain (and Italy and Ireland and ....). Quarterly Journal of Economics, (1991) 106, 669'682: Krugman, "Target Zones and Exchange Rate Dynamics."
 
camberiu said:
...Where where the Ivy League "wizards" of the World Bank, IMF and US Treasury before the "shit hit the fan"? How come it was not obvious to them? How come only the marginalized and mocked Austrians saw this coming?
Click to expand...

Because Austrian economics predicts the very behavior of booms and busts that Keynesian economic's methods use to control money and resources cause.

Keynsians think that pumping stimulus into the economy in the form of money created from nothing (debt to yourself) stimulates an economy. The best way to do that, they think, is to adjust interest rates to make borrowing easier and encourage entrepreneurial investment and spending in general.

According to the Austrians' predictions, that behavior allocates money and resources into arbitrary sectors of the economy (i.e., not determined by market/demand) which grow beyond true demand as people spend money because it's so cheap. This starts a "boom" which must lead to a bust because other sectors need resources and money that they are not getting. It creates a disequilibrium in the market. Pouring more money in the form of stimulus keeps the market from correcting itself and makes things worse and will continue to worsen until the market can finally work out the improper distribution of resources.

The Austrians knew when the Fed in the US was manipulating the interest rates that a boom-bust cycle was going to happen. In particular, many warned of this exact issue after the .com bubble burst and Greenspan was lowering interest rates to keep things going. The improper allocation of resources and capital went from .com into housing, making the .com correction not substancial enough and putting off the inevitable, but with a bigger bang when the correction came.

People need to take a look at how the recession of 1920-21 was handled by the US government. Things were looking real nasty, but instead of pumping in stimulus into the economy, bad businesses were allowed to fail, the government cut its budget BY 50% (!!!), the Fed did not manipulate interest rates, and what had started out with something like 14% unemployment and a huge drop in production was over in less than two years as the market sorted itself out.

But the powers that be in the US don't like to mention that recession, instead pointing to the Great Depression, which, as everyone knows, was handled perfectly by the government by stimulus and government work programs and actually was only ended by World War II...
 
You must log in or register to reply here.
Back
Top