- After all the excitement of the last few days, Mario Draghi says nothing about further stimulus in the Eurozone. The official position of those expecting stimulus is “saying nothing means that he’s leaving the option open”. The argument about austerity is now a boring one: austerity kills growth and therefore the ECB should stimulate in order to create growth. Blah. This is the Paul Krugman argument. What’s wrong with it? Well for example, while it’s possible that Greece’s economic growth could get to a point where it could cover its fiscal deficit, is it probable? It’s all well and good to say that austerity won’t work. But then, the problem is they’re spending more than they can ever hope to make. So growth won’t work either, except as a temporary solution. The only permanent solution is a cultural paradigm shift in a more German-frugality direction. What causes cultural paradigm shifts? Cultural shocks. Like austerity. Link: Draghi “leaves the door open”.
- Paul Krugman “wishes he were wrong” about the EU Austerity Backlash. Bollocks. Paul Krugman is well smug that he was right about the Europeans backlashing against austerity. But as for the people calling him a “genius” – at them I raise a skeptical eye-brow. Did anyone expect the freshly austere european nations to be happy about it? Or for things to get better before they get worse? We must be serious. That said, I see his point about austerity being self-defeating – because the economic downturn heightens the depression and could lead to increased debt levels anyway. However, while it’s fine to say that the multiplier effect of decreased government spending magnifies as it hits the economy; the question to be asked is – what impact does lower output have on a government that uses debt financing as an alternative to revenue collection? Not too much. The underlying problem is cultural, and “economic growth” was the banner under which the problem began. I honestly believe that austerity has a much better chance of changing that mindset than more of the same. Link: But does that really make him a genius?
- Gold Standards – is returning to them crazy? The mainstream economists think so. But my money (literally) is on America having to return to it. After all – clearly the current system isn’t working. Link: The Fringe Economists.
- Facebook backers plan to sell $5.5 billion in stock. When the initial investors on the inside (Goldman Sachs and Accel Partners) elect to sell enough of their stock to become two of the largest sellers in the IPO, people begin to wonder why they’re so keen to get out. Link: The Insiders are getting out.
Daily News Roundup 2012: Friday 4 May4 May 2012
That’s all for now.
Have a good day.