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.

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