Wednesday, 15 May 2013


This blog-post is in reaction to two letters from John Mauldin and a blog-post by Noah Smith who has gotten some well-deserved attention.

The theme linking these three articles is whether there is a justification for austerity right now and what it might be.

After all, we are clearly far from full employment and inflation has turned out to be no threat (you can add 'so far' if you are one of those who refuse to admit that fears about bond vigilantes and hyperinflation were wrong).

Why not follow Krugman's policy recommendation? The poor man is losing his voice repeating himself week after week. Or we could try and follow Sumner's ideas and, like Japan, carry out  an (even more?) massive monetary stimulus.