A FIERCE debate is raging within Europe over the question of austerity. Some argue that countries within the euro zone, and on the periphery especially, have no choice but to embrace savage budget cuts. Others point out that the crisis is about more than just budget deficits, that some countries have room to cut less, and that austerity across the euro-zone as a whole should be pursued at a slower pace.
After the fact it all seems so simple. Accordingly, the eurozone would have ended up with a different outcome if economists knew ahead of time the effects of a heavy dose of austerity. Specifically we are referring to the impact of so-called dynamic fiscal multipliers, the subject of a recent research report by Darren Williams and Dennis Shen, the European economist and research associate with Alliance Bernstein, a major institutional money manager.
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Go to 1:45 in this video and listen carefully for at least 5 minutes (you'd probably want to watch more if you have an interest in truth in reporting, competent analysis, or simply the truth). Keep in mind that this interview was done in February, no crystal balls, just spreadsheets and common sense. Independent news has truly come into its own.
The Angry Bear submits:
By Rebecca Wilder
Just look at Tracy Alloway's imagery at FT Alphaville, and you'll know what's expected: An imminent Greek default. I still argue no, although European policy tactics are quite enigmatic and their next move is really anyone's guess. Alas, here's mine.
David Leonhardt once again delivers with a great column, this time on the global enthusiasm for austerity. He sums up the case against the austerity wave sweeping the world, and summarizes why it’s happening anyway: