Dienstag, 8. Januar 2013

Austerian in Wonderland

Austerian believes in as many as six impossible things before breakfast:

Recessions are supply-side problems,
Austerity policy can provide economic growth,
Each increase in the monetary base leads to large increases in the price level,
Big government deficits cause big increases in interest rates (Bond Vigilantes)
The rise in unemployment is due to structural factors (skill mismatch). There is nothing we can do about it,
Fiscal cliff is a debt problem.

This is especially the case, when suddenly Austerian encounters a long way a liquidity-trap economics with many locked doors of all size. Particularly with the economy depressed and the interest rates at the zero lower bound, Austerian can deliver nothing but deficit panic and no reconsideration of fundamentally misplaced predictions in the last five years.

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