Thanks to Paul Krugman and his recent post once again trying to explain rational economic policy to the irrational, we have this graph.
Now without knowing anything else, which of those countries would you want to be?
The negative numbers for
are the direct result of their economic policies and austerity, primarily the
huge cuts in government spending and government employment. If one added Spain,
Portugal, Ireland and Greece to the chart all would show
the same result, since all have followed the same policy.
But wait, what about
? Hasn’t Germany Germany followed a policy of
austerity and put balancing its budget ahead of everything else? Yes that is the case, but Germany is a
special situation. The German economy is
heavily export dominated, and a large trade surplus acts just like a government
deficit in stimulating the economy. So Germany can
have contractionary fiscal policy because they have exports greater than
But guess what, not every country can do this. If
sells more to Spain then Spain sells to Germany,
then it is impossible for Spain
to sell more to Germany than
Germany sells to Spain. (think about it) Yes that is the most simple logic there is,
but it apparently is lost on policy makers.
Mr. Krugman explains things this way. Japan
Wait, what? Japan as star performer? What’s that about?
Actually, no mystery. From Bloomberg:
which is spending heavily for post-tsunami reconstruction, is growing quite
fast, while Italy,
which is imposing austerity measures, is shrinking almost equally fast.
There seems to be some kind of lesson here about macroeconomics, but I can’t quite put my finger on it …
And as for the future of the
U. S., if as expected Republicans take control
after the November elections look for the U. S.
to move closer to Italy and Britain. And just like in Britain, expect Conservatives to
deny that their policy is anything but the right one and must be continued.
Just thought everyone would like a preview of 2013 and beyond.