Krugman on Why the Eurozone is in Big Trouble

I’ve been quite explicit about my disagreement with Paul Krugman. His view is that the main problem in America’s economy is a lack of demand that could easily be reversed by a big enough fiscal stimulus. My view is that lowered demand merely reflects underlying structural problems, very often at a global or systemic level. Big stimuli would make the problems go away for a few months or years, only to re-emerge at a later date if the underlying causes aren’t addressed (as I discussed in more depth here).

But he’s definitely onto something (as opposed to on something) today. Here’s a Venn diagram of the road ahead for Europe:

The real question is whether or not Professor Krugman would include a fake alien invasion (to create spending and raise demand) in the “things that might actually work” category.

6 thoughts on “Krugman on Why the Eurozone is in Big Trouble

  1. Dear Mr. Krugman,

    “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”


    Ludwig Von Mises

  2. Don’t you love seeing Keynesian economists squirming as their policies fail, fail, fail.

    As people investigate why they have an economic situation, they discover theories like Mises’.

    In time, the Politicians who spout the policies of Mises, will be heard by more and more people. I see a slow policy shift.

    Can’t wait for the Keynesian Economist to undertake “Skills retraining” in order to apply for a job in the next Liberal Economic Government.

  3. We live in a time when the main players in the world’s finances don’t want the dollar or the euro or even the idea of Africa having it’s own equivalent of the Euro-that’s why they reacted so quickly in Libya to stop it happening!They want a new one world currency.So for this to happen all currencies must collapse!This is happening before our eyes right now!I was reading about these long term plans over ten years ago and I have watched things move into place like a well organised chess game!For economists much of what is happening,in truth,makes no sense!LOL!The Euro was doing OK then all of a sudden nearly every country is in a mess and the Euro is about to crash!Firstly,ask yourself is this really believable.Secondly,ask yourself if everyone is doing so badly why is Germany doing OK-because if this illness was all over the Euro nations then Germany as a financial nation should be crashing too!So obviously we need to look at why the Euro is being allowed to die by the Germans and I would say they are now ready for the next development toward a one world currency and have acknowledged that the Euro experiment has finished.

  4. You were right about the Africans. Tribalism was ending, and there was more emphasis on the African Union. Libya was doing pretty well under Qadafi.

    Who is going to visit Libya or Egypt now, especially after all the instability. Their Tourism sector is decimated, and now oil prices are coming off the boil.

    The poor people have been suckered into Democracy. Now the squabbling and infighting begins.

    Chess Game alright.

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