Wednesday, December 14, 2011

This answers maybe 60% of Bob Murphy's "Krugman Kontradictions"

Krugman writes: "It’s worth pointing out, by the way, that while conservatives have seized on European sovereign debt for vindication, the euro story is very different from the story conservatives were originally telling. Italian rates are high because of solvency concerns, while the original right-wing story for interest rates was all about competing for private funds, not worries about repayment."

By all means take issue with the analysis, but I don't think it usually amounts to a contradiction.


  1. Not too long ago, Krugman briefly examined the history of British debt in a blog-post. While the Western world may be in a classic liquidity trap scenario, I've been lately wondering about private debt ratios in relation to GDP thanks to this book...

  2. I feel like in some ways that Krugman post about British debt was disingenuous since he didn't really get into the history. The fact of the matter is that when brittian came out of WWII with the massive debt/gdp ratio they had their economy was in ruined and they were forced to dismantle their empire and they went through ten years of strident austerity and another 20 years of economic turmoil, though you can't attribute that all to debt.

    I mean, if you wanna focus on the Napoleonic Wars debt jump that's one thing, but I kind of find it hard to use Britain as a unambiguous example of "debt doesn't matter".


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