“The pursuit by governments of policies contrary to their own interests, despite the availability of feasible alternatives”
by digby
Ok, It’s time to worry. Krugman:
For some reason events in European bonds markets aren’t making big headlines. But they should be: even as the GOP does its best to destroy America’s credit, things are falling apart, with a vengeance, on the other side of the Atlantic…
What this is surely about, instead, is the growing sense that European recovery is sputtering out, and that the European Central Bank — which sets short-term rates — will eventually call off or even reverse its planned rate hikes, with rates staying low for a long time.
In short, what the markets seem to be seeing is disaster on the periphery and the Japanification of the core. And I can’t say they’re wrong.
In his next post he writes:
Simon Johnson writes about who’s worse — America or Europe? Basically I agree with his assessment: Europe has more fundamental problems in sheer economic terms, because it adopted a single currency without the necessary institutions to make it workable. America has a long-run budget problem, but our current mess is entirely political. Unfortunately, that doesn’t make it any easier to solve.
What’s extraordinary, though, is the paralysis that has taken over essentially the entire advanced world…
The only major problem we have right now is the one that was supposed to be easy to solve: a simple lack of adequate demand. And we’re totally failing in our response.
In the long run, Keynes must be spinning in his grave.
This is lunacy. I thought I could put it away for awhile but guess it’s time for me to get out that dog eared copy of Tuchman’s March of Folly one more time.
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