No Ed, that wasn\’t the 30s mistake

I fear what\’s happening here is that the world is making the 1930s mistake and the ratings agencies are partly responsible for this.

Even though it is clear in Greece, in Ireland, in other countries, in Britain too (that) this austerity isn\’t working, the message is \’Plough on, dig a deeper hole, carry on with an austerity that is failing\’.

You really need to read some Freidman.

The 30s mistake was not austerity. Because there really wasn\’t all that much austerity in the 30s. In the UK the big squeeze was in the 20s (the Geddes Axe) and in the US Hoover doubled Federal spending and blew out the budget deficit.

The mistakes in the 30s were monetary, not fiscal. The UK didn\’t have a horrendous slump in the 30s because we came off the gold standard and thus fixed that monetary problem. The US didn\’t. The Fed allowed the money supply to collapse.

And as you\’ll have noticed, what with QE and the propping up of the banks, we\’re just not making the same mistakes in the 00/10s as were made in the 30s.

Where the situation really is bad, Greece, Portugal, Spain etc, they really are making the mistakes of the 30s. They\’re allowing the money supply to fall and there\’s sod all they can do about it because they\’re in the euro.

All of this leaves room for the argument that fiscal expansion will make things better. Happy, for the moment, to leave room for that argument. But given that the mistakes of the 30s were monetary let\’s make sure we don\’t make monetary mistakes right now, eh?

6 comments on “No Ed, that wasn\’t the 30s mistake

  1. So all would be well if the ratings agencies would only give Greece a triple A rating.

    Funny I remember how in 2008, they were to blame for giving Triple A ratings to toilet paper.

    What ever you think of the rating agencies, their credibility is still higher than the politicians who basically want to move the goal posts, and stick their fingers in their ears, shouting lalalalala when told something they don’t want to hear.

  2. Actually its politicians like Ed Balls who are the most likely to drive us into a depression.
    Free money, vote for me ,millions of non jobs to be created out of thin air.
    Any growth crushed by red tape and over taxation.
    Yes Ed it is your BIG GOVERNMENT approach that has caused all of this lack of growth.
    This is what has gotten us into the mess in the first place.
    Politicians like Balls just do not get it do they?

  3. “… with QE and the propping up of the banks, we’re just not making the same mistakes in the 00/10s as were made in the 30s.”

    To be fair Tim – we might well be making all kinds of new mistakes here…

  4. @ARand, quite.

    With QE, we have a big pulse of inflation in the pipeline. Let that wreak its effects and we can subsequently fiddle the figures to claim that inflation-adjusted GDP is higher than it would have been without QE and inflation, when it probably actually isn’t. Without the inflation the figures would be harder to fiddle.

  5. So what was the LTRO, then, if it wasn’t 489bn euros of new money put into the Eurozone economy via its banks?

  6. “big pulse of inflation in the pipeline”

    Did you use your crystal ball or your astrology charts to foresee this Evident Truth?

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