Krugman Says "I Told You So!"

Here's Paul Krugman giving a big raspberry to the right wing nuts who have been pushing the agenda of Andrew Mellon with austerity. Mellon's famous quote was "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Well Ireland and done everything Mellon asked and it is on its knees and gasping. Iceland took a more modern approach, a "heterodox" approach, where economic failure is not seen as a sin that must be expiated by long suffering through austerity.

Ice And Fire Update

Iceland is growing again. Of the excessive peripherals — Ireland, Iceland, Latvia, Estonia — Iceland had by far the biggest excesses, with a totally ludicrous buildup of debt. Yet through the magic of default and devaluation, it’s actually doing better than the other three.

One of the remarkable things about the crisis of the past three years is that it has ended up strengthening the political hand of hard-money, austerity-imposing orthodoxy — yet the reality is that heterodoxy has worked much better in practice.

And this...

Poles Apart

Good piece in the Times about the advantages Poland is deriving from not having adopted the euro (yet):

The floating zloty, which has fallen about 18 percent against the euro since early 2009, acted as a pressure release valve, helping to keep Polish products competitive on world markets and insulating Poland from the effects of the sovereign debt crisis.

Poland has proved itself to be Europe’s most dogged economy during the last two years. It was the only member of the European Union to avoid recession, soldiering on even after a plane crash in April killed much of the political elite, including the president and the central bank governor. No banks needed to be rescued.
You want to think about just how hard it would be to cut wages 18 percent, as opposed to achieving it automatically via depreciation.

Sadly, Obama appears to be more in the "austerity" camp. So 8 million Americans will pay for the sins of Wall Street with its collateralized mortgage obligations based on liar loans and a financial system run amok because the "deregulate, deregulate, deregulate" philosophy of the Republicans said that big money would look after itself. Well, instead big money fleeced the economy. Meanwhile, Bush and Obama gave the Wall Street bankers hundreds of billions to "make the whole" while it is giving the tough love of "austerity" as the medicine for Main Street and all the unemployed, underemployed, and foreclosed upon "little people".

Krugman has the right to say "I told you so." If you go look at his record of economic advice it has been consistent and correct. Sadly Obama wasn't interested. Obama decided to continue to Bush policy of heal Wall Street and let Main Street flounder. Obama negotiated with himself over stimulus and unemployment extensions and has managed to talk himself into cutting it down to something acceptable to the Republicans before he ever entered into "negotiations" with the Republicans. So the Republicans were able to ensure that the billionaires and millionaires will get "relief" from these hard times.