Tuesday, February 2, 2010

Paul Krugman: Words to Live By

Paul Krugman laments the power of conventional wisdom:

Meanwhile, the Times has an editorial on the troubles of the euro, which is perfectly fine as far as it goes. But by focusing on Greece, it might lead readers to believe that the euro’s woes are essentially fiscal — that the problem is spendthrift governments that never lived within their means.

Not so. The biggest trouble spot isn’t Greece, it’s Spain — which was running budget surpluses just a few years ago. True, Spain is running big deficits now — but that’s because of its economic collapse. And underlying that collapse is the real problem with the euro: one-size-fits-all monetary policy, which offers no relief to countries that suffer adverse shocks.

Against conventional wisdom, the gods themselves …

1 comment:

Anonymous said...

This is an excellent point. The Spanish economy is in real danger of collapse. My sense of it is that the country will soon be relying on tourism dollars again instead of construction.

And so the country will never outlaw bullfighting if it can still pull in the curious tourists....