[...] there is no fiscal crisis. The only real problem is the totally artificial one imposed by the “fiscal cliff” legislation passed by Congress last year when its forlorn attempt at a “super-committee” on the deficit failed to reach any agreement.Oh yeah. Interest rates are starting to head up, which means the fiscal crisis is going to expand by a multiple of its current self, as the Treasury will be forced to pay higher rates on the money it borrows. Far from not being a crisis, it is about to become a crisis squared.
He then mentions "Nobel Prize-winning economist Paul Krugman," to support his case. A major problem with this is that Krugman pretty much received his award for geography, or as the Nobel committee put it, ""for his analysis of trade patterns and location of economic activity". No one considers Krugman an expert on the deficit and what's more, his entire understanding of the structure of the economy and business downturns is based on a misinterpretation of the historical account of the goings on at a babysitting co-op.
Thus, Delamaide displaying no understanding of the economic world in his first few paragraphs goes for the biggie by sealing his position as completely economic ignorant with this doozie:
The U.S. economy has fared somewhat better than Europe precisely because Obama in his first term was able to get some stimulus spending passed, while Europe remains mired in the obsolete and discredited policies of the “Austrian” school of economics, which sees austerity as the answer to everything — much as medieval doctors saw leeching as the cure for all illness.
First, an Austrian economist did get a Nobel Prize for business cycle theory, not geography. The committee wrote the prize was awarded to Austrian economist Friedrich Hayek for:
pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.
Second, as Hayek and other Austrians would be able to explain, the developing recovery is a manipulated recovery. The result of Bernanke money printing rather than government spending, which is simply a transfer payment.
But finally, Europe is not applying the policies of the Austrian school of economics. An Austrian school policy, if increasing the standard of living were the goal, would call for an elimination of all regulations on the economy, the reduction of taxes to zero or near zero, elimination of unemployment payments and a return to gold as the monetary standard. None of these policies are being implemented anywhere in the eurozone.
Delamaide confuses Austrian policy, with current "austerity" programs, which everyone from the geographer Krugman to Bob Murphy promote as nearly the same thing. Causing the clueless like Delamaide to fall completely into the trap, while Krugman and Murphy both understand the difference but confuse the issue. "Austerity" in the eurozone is about raising taxes, central bank monetary control (the ECB) and micro-economic management for the benefit of banksters and cronies---far from anything an Austrian school economist would propose in order to get an economy out of its decline.
Top to bottom, Delamaide is clueless on facts and theory about deficits, business cycle theory and basic economics.
(ht Anthony Trevisan)
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