Dr. Realist Nouriel Roubini has a new piece up at Project Syndicate that contains a gem we hadn’t heard before:
Indeed, a practical definition of a financial crisis is an event that forces policy officials to spend a long weekend trying desperately to announce a new bailout package in order to avoid national and global panic before the markets open on Monday.
Indeed we’ve been wondering whether we’ll have a big weekend this weekend given the crash taking place in Europe.
The rest of the piece is somewhat familiar: Crises morph from one thing to another. First it’s a banking crisis, then it’s sovereign debt.
What may be most controversial is where he describes the proper “medicine” as austerity and spending cuts, which is certainly the medicine that the PIIGS are now being injected with, but which is not a solution that Roubini describes as “well known.”
Given the fact that countries like Ireland have gone on austerity only to see their debts increase, many — like, say Krugman — aren’t likely to call for spending cuts as the solution.