The BBC has an interesting (and very deluded) article on Europe, Greece, Germany, etc & their debt problems:
In October, Europe’s leaders reached yet another wide-ranging deal to prevent economic problems from causing financial meltdown in the eurozone.
For many onlookers, the issues they face may seem complicated and interconnected.
But essentially they boil down to four big dilemmas:
- Borrowers vs Lenders
- Austerity vs Growth
- Discipline vs Solidarity
- Europe vs the Nations
Actually, I think we can simplify much further.
There is one big dilemma:
- Delusion vs Reality
That delusion is that the global financial system can be so interconnected, and so leveraged that it can continue to exist in a state whereby the default of one small country can trigger a death spiral so severe that much of the system has to be bailed out over and over just to avoid the dreaded default cascade, and mass insolvency. The reality is that the system is so interconnected and leveraged (“too big to fail”) that it will keep failing and failing and failing until it is allowed to fail. Interconnection and leverage means fragility. What we need is independence (so that fragile things can fail without bringing down the entire system).
azizonomics 
Years of counter-cyclical spending have made it not only possible, but necessary, to have a depression.
People (including occasionally myself) unfairly refer to modern statist economics as “Keynesian”. It’s not — the spending isn’t counter-cyclical — it’s an endless free-for-all — deficits in lean years, deficits in fat years.
Keynes (for all his faults) understood basic math — to do the counter-cyclical spending, governments have to save in the fat years.
It’s a total hypothetical, but I imagine Keynes himself would roast most of today’s endless-spending “Keynesians” for butchering his ideas.
“Austerity vs Growth”
That doesn’t make sense to me. If ‘Austerity’ means reducing government expenditures, then that means more growth of the economy (the free-market is allowed to invest more wisely and wealth grows faster). If the Europeans know what a joke Modern Keynesianism is, they’d realize it really:
“Austerity vs Shrinkage”
I read your post about Keynes butchering modern ‘Keynesians’. What name should we use instead? Modern-Keynesianism? Millitary-Keynsianism? Neo-Keynesianism?
There are two kinds — Krugmanites who are merely foolish enough to believe that a fake alien invasion will raise aggregate demand enough to create a recovery (etc), and weaponised Keynesians (Mitt Romney, George W. Bush) who use Keynesianism as a pseudo-justification for military adventurism/ neo-colonialism. The second group are far more dangerous.
Then there is a third type of modern Keynesian — https://azizonomics.com/2011/08/29/is-obama-a-keynesian/
As for austerity, I am not really a fan of austerity after the bubble has burst. For me, austerity is something you need to do before the bubble bursts, to prevent the malinvestment that causes the bubble to blow up and burst. After the bubble has burst, austerity just makes the contraction more painful, especially if tax levels remain the same or rise to pay down debt (same amount of money or more taken out of productivity economy, with less being re-injected). Instead of austerity, it is better to keep gov’t expenditures and taxes at the same level in the short term, and re-direct them to more productive endeavours (restoring some Western manufacturing capacity would be nice), and reduce them in the long term once there is significant job growth.
Hmm… I had the feeling you were an Austrian. How do you describe yourself, as a paleo-Keynesian?
I’m a scavenger. I take whatever fits reality. I don’t subscribe to any grand theories, though it wouldn’t be completely inaccurate to call me Austro-Keynesian. Austerity won’t work, but neither will Krugman’s hyper-leveraged stimuli. The way out of this mess is debt-cancellation by some kind of negotiated default, or debt jubilee, and movement to some kind of non-debt-based monetary system.
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