Monday 12 December 2011

Some interesting articles on the Eurozone and Keynesian economics

Kevin O'Rourke writes in A Summit to the Death
One lesson that the world has learned since the financial crisis of 2008 is that a contractionary fiscal policy means what it says: contraction. Since 2010, a Europe-wide experiment has conclusively falsified the idea that fiscal contractions are expansionary.
He's also critical of the recent European summit and the agreement reached:
What is needed to save the eurozone in the medium term is a central bank mandated to target more than just inflation – for example, unemployment, financial stability, and the survival of the single currency. A common framework for regulating the financial system is also required, as is a common banking-resolution framework that serves the interests of taxpayers and government bondholders, rather than those of banks and their creditors. This will require a minimal fiscal union; a full-scale fiscal union would be better still. Yet none of this was on the summit’s agenda.
John Cassidy asks in the New Yorker article The Demand Doctor "What would John Maynard Keynes tell us to do now—and should we listen?". This is an interesting article on Keynesian economics.

A lot people seem to think that Keynesian economics is all about budget deficits. They're only partly right. Governments may need to run deficits when economies are in recession so as to stimulate demand. However, and this is something Keynes well understood, when economies are going well Governments should be saving -that is running budget surpluses. As the old cliché goes, make hay while the sun shines.

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