One by one, the voices calling for fiscal and monetary tightening are disappearing.
Soon it will just be Niall Ferguson and the Washington GOP alone together in the wilderness.
Here’s Martin Wolf in the FT showing that the massive upsurge in private savings must be accompanied by ongoing spending.
And here’s Goldman’s Jan Hatzius calling for quantitative easing 2.0.
And yet we’re pretty sure the market is expecting the opposite to occur. Rather than pricing in ongoing spending, the consensus seems to be that austerity is coming, not just to Europe, but also to the US once the Republicans sweep into power. That we can draw parallels to the second half of the Depression makes this line of reasoning even easier.
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