April 28, 2012
The Real Keynesian Economic Winner Germany
I was listening to Paul Krugman's argument for how digging ourselves into a deeper hole will save us all yesterday.
The New York Times columnist and Nobel laureate argues that Keynesian economics got us out of a much worse depression in the 1930s, so if we were to follow Keynesian prescriptions now, we could get out of this one too.I've heard a lot of discussion about this. Where the UK's dip in GDP was blamed on cutting spending. The US's weak growth is because we're not borrowing enough money.
Spending cuts are always labeled as austerity. Whatever it is "austerity" must be bad.
But what they don't want to talk about is that all these countries who were applying Keynesian economics during the last ten years before the recent recession are now begging for loans from Germany.
Germany began looking at deficit during the good times. Just like Krugman says we should have done. It hurt their growth somewhat during that period. Even so, in the end Germany could afford to apply Keynesian stimulus to their economy when needed.
Apparently they also have enough money to finance the Keynesian stimulus on top of the past Keynesian stimulus for the rest of Europe as well, or so the countries who wish to apply more Keynesian stimulus on top of the Keynesian stimulus applied to the Keynesian stimulus would tell you.
Austerity has been very good for Germany, no?
Quite simply we have not made the tough decisions that would have put us in a position to win at Keynesian game. Germany did.