Paul Krugman is quite upset with the deficit hawks at the G-20, so much so that he says Lost Decade, Here We Come



The deficit hawks have taken over the G20.



It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.



The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.



Utter folly posing as wisdom. Incredible.

G-20 an Amazing Success

With all the heated debate and every country doing what they want, inquiring minds just may be asking "How the heck can you call this a success?"



That's a good question so let's highlight the positives.



Defining G-20 Success



Merkel and Trichet politely told Geithner to go to hell. Given that Geithner needs to be fired, this is a positive event.

Europe is more concerned about sovereign debt issues than stimulating growth. Only fools like Geither and the IMF would argue against that.

No one paid any attention to Geithner or the Keynesian clowns at the IMF, most notably, IMF Managing Director Dominique Strauss-Kahn.

There was no agreement on a universal bank levy. A universal tax is the wrong approach to risk management and it punishes banks with good lending practices.



Geithner made a complete fool out of himself.

A dozen cheers for German Chancellor Angela Merkel who said “We can only spend what we receive in income.” Finally someone gets it.



What more could you possibly ask for?

Predictable Reaction

Kiss the Illusion Goodbye



With global stimulus efforts playing second fiddle to default concerns, a double-dip recession is just around the corner. Please see Hungary Tries To Calm Markets; Europe Headed Back in Recession, US Will Not Decouple for further discussion.



The Keynesian clowns will be howling that reduced stimulus killed the recovery. However, the reality is there was no recovery in the first place, only an illusion caused by unsustainable stimulus.

Krugman's Magic Mirror

seemed

Hello Paul!

Yes, Paul, we lost a decade. Yes, Paul, we are going to lose another, not because we failed to follow your recommendations, but precisely because we did!

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