That’s what the IMF says and that repeats my earlier claims (and those of all sensible macroeconomists). Increased personal savings, savings by firms and pressure on governments around the world to reduce deficits are driving a situation that replicates events that ocurred during the Great Depesssion of the 1930s. Too little demand due to excessive savings. The desire of firms and citizens to rebuild personal balance sheets is natural enough but the moves by Republicans in the US to rein in government spending, by debt-obsessed Europeans to force massive fiscal contractions in profligate southern European economies create very substantial risks. In Australia the nitwit right and the Coalition are harping on the need to cut government spending and debt to meet pre-imposed deficit reduction targets even though the latter are not a concern.
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“by debt-obsessed Europeans to force massive fiscal contractions in profligate southern European economies create very substantial risks.”
Two year Greek debt is trading at a yield to maturity of 76.5%
Professor, would you mind telling us if you think this is a rate the Greek government could realistically sell bonds? Also would you explain to us who the buyers are?
Across the EU sovereign debt is around 85% of GDP. Do you think this is a debt level that ought to be concerning?
The US has a 1.5 year maturity duration which means they are rolling over their debt every 1.5 years. How do you feel about rolling over 15 trillion of debt in such a short time frame?
“In Australia the nitwit right and the Coalition are harping on the need to cut government spending and debt to meet pre-imposed deficit reduction targets even though the latter are not a concern.”
So you think holding on the fiscal reins is a bad thing in a world that is repudiating sovereign debt. Interesting.
Ever heard of monetary policy, Professor?
Agree the US should spend more, but as anon says surely you can’t spend more if no one will lend you the money at a reasonable rate. Which is the case for some European countries, who have dug themselves almighty holes.
Well said, Harry, but one small quibble with “moves … by debt-obsessed Europeans to force massive fiscal contractions in profligate southern European economies”; not with “debt-obsessed Europeans” but with “profligate southern European economies”. Before the GFC, Like Ireland, Spain was the opposite of profligate. Their membership of the PIIGS is down to other factors — factors apparently invisible to the priesthood and faithful (e.g. your first commenter) of the cult of austerity.