Some Interesting Reading

A couple of interesting op-eds from the NY Times/International Herald Tribune.  One is on life in Athens today and the other on debt and the Walker recall election in Wisconsin.

Doom and Gloom

The news remains bad.  A NY Times article reports that the Greek government may not have enough revenues to pay its bills, such as paying employees, as early as July. The steep recession is reducing government revenues. Another article reports that Spain may need help soon because the risk premium on their bonds is becoming too high. The G-7 are holding meetings on the crisis in Europe and maybe something will come out of that. (Article here). 

A column by Martin Wolf is entitled, "Panic Has Become All Too Rational." He notes a lot of reasons to be gloomy about he world economy.  He describes the West as in a contained depression. Deflationary forces are at work as households are reducing debt levels by spending less and savng more. Government policies have prevented it from becoming a full-fledged depression, but austerity is altering that. The scariest comment he makes is that he used to wonder how the 1930s could have happened. Now he understands. Clearly, Wolf thinks it could happen again.

Pieces from Today's Wall Street Journal

Several pieces in today's Wall Street Journal that are of interest.  The first is a long article on the Greek crisis.  I was in Germany two years ago to teach a short course on public policy. Greece was in the news so I included a part of the course on the Greek situation.  Last year I taught the course again and, once again, Greece was in the news so I discussed it again.  I will be there shortly and it appears Greece can be an illustratation again.  This article is likely to be one of the handouts for the class.

There are also two op-ed pieces.  The first looks at how President Roosevelt changed his policy in light of the war in Europe. He quit bashing big business and asked for help from big business to help gear up for the war effort.  The second is by economist Robert Barro concerning stimulus spending. He counters the claim by Keynesians such as Krugman that the problem in Europe is austerity and that massive fiscal stimulus is needed.  He argues that there is a short-run stimulative effect of an increase in government deficits but that it turns negative after a few quarters.  If he is correct, it could generate the same kind of problems the stop-go monetary policy we had in the 70s.  The stimulus in money supply would reduce unemployment shortly, but after awhile the unemployment went back up and was accompanied by ever higher inflation rates.  We could have bouts of stimulus that fails over time at everthing except generating higher debt levels.