Sunday, March 31, 2013

Paul Krugman explains Austerity Trap in One Sentence

I realize that it's Easter and that I should be posting something about Jesus rising from the dead, but I just read a blog post by Paul Krugman that explained his objection to fiscal tightening in one short paragraph:

"... the crucial place to start is with why Wren-Lewis, Brad DeLong, Martin Wolf, Larry Summers (at this point, anyway), yours truly, and more are against austerity now. We’re not always and everywhere against fiscal consolidation; give me the right economic circumstances and I’ll turn at least modestly deficit hawk. We are, instead, against austerity when the interest rate is against the zero lower bound, because when the economy is in a liquidity trap the contractionary effects of fiscal tightening can’t be offset by monetary expansion [lower interest rates]."

Brevity while maintaing clarity is not an easy thing to accomplish, especially about such complex topics as economics, and should be singled out as role models to others.

Now back to more important things, such as why, regardless of how hopeless human-run institutions are, at least we can have hope in our eternal destination because God became a human being, died, and rose from the dead, and will take all who are willing along with him into new Life.

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