Must-Read: Paul Krugman: Policy Lessons From The Eurodebacle

Must-Read: Paul Krugman: Policy Lessons From The Eurodebacle: “Greece I tell you. What we learn… is that fiscal austerity plus hard money is a deeply toxic mix…

…For comparison, look at everyone’s favorite example of successful austerity, Canada in the 1990s… gross debt of roughly 100 percent of GDP… a pretty big fiscal adjustment–6 percent of GDP according to the IMF’s measure of the structural balance, which is about a third of what Greece has done…But unemployment fell steadily. What was Canada’s secret?… Easy money and a large currency depreciation…. So, how does this play into U.S. policy debates?… The policy mix that is now de facto GOP orthodoxy: sharp cuts in government spending (maybe offset by tax cuts for the rich, but these won’t provide much stimulus), combined with a monetary policy obsessed with fears of dollar ‘debasement’. That is, the conservative side of the US political spectrum, while holding up Greece as a cautionary tale, is actually demanding that we emulate the policy mix that turned Greek debt into a complete disaster.