Was Paul Krugman scared by Niall Ferguson’s latest presentation on how all this debt and spending has turned the US into Greece and is going to send us careening to default?
Krugman is still worried about the opposite: That we’re all so obsessed with preventing inflation and fixing the debt and deficit problems that we’re heading for another lost decade.
We’re not Greece, Krugman says. We’re Japan. So it’s time for another stimulus.
(And without taking a firm side in this argument, we will merely say that it’s time for Ferguson to explain why all the debt and spending that Japan has done for the past 20 years hasn’t produced wild inflation or turned that country into Greece–at least not yet. And it’s also time for Krugman to explain how, if we launch yet another stimulus, how we’re going to work off all our debts when we’ve already got debt coming out of our ears.)
Despite a chorus of voices claiming otherwise, we aren’t Greece. We are, however, looking more and more like Japan.
For the past few months, much commentary on the economy — some of it posing as reporting — has had one central theme: policy makers are doing too much. Governments need to stop spending, we’re told. Greece is held up as a cautionary tale, and every uptick in the interest rate on U.S. government bonds is treated as an indication that markets are turning on America over its deficits. Meanwhile, there are continual warnings that inflation is just around the corner, and that the Fed needs to pull back from its efforts to support the economy and get started on its “exit strategy,” tightening credit by selling off assets and raising interest rates.
(When you finish reading Krugman, you should check out Ferguson’s presentation here >)