Well Austrian and Kensyan do not fail as much as they are not really all that helpful, they are just techniques governments use to claim they are doing something when in reality fixing the economy is up the well the economy as a whole. Don't get me wrong, Kensyan is good on the short run to keep an economy from going out of control, but eventually the private sector has to pull their weight otherwise you end up like Japan. Austrian is good when the economy is already marching along or when balancing the budget is possible (meaning the long run) when is not maybe Default is the better option. IMO.
None, the Austrians try to prevent them, once they are here they just say let it roll and try not to have bubbles next time, not what people want to hear for sure. The problem with Austrian economics is that people ignore the lets not overheat the economy and only pay attention to lets cut the deficit part, just like the USA republicans did. They were more than happy overspending during the bubble years, and now they are all into deficits, that is hypocritical. Austian model (half of it) is giving us Spain, Greece (the EU). Kensyan model is giving us Japan. I guess the Kensyans are winning, but lets see in 10 years since Japan started their "recession or slow down is a better term" over ten years ago.
Well I do not think I fully understand it that is fact; I do understand that we are all supposed to be Kensyans now. I think the Kensyan model is ok when interest rates are low and people want to let you borrow money like the USA or Japan, I think it makes sense for us (the USA) to borrow money to inflate the economy. But my limited understanding of the Kensyan model is that eventually if you keep doing it for too long you may run out of people that want to let you borrow money and interest will go up, then the problem arrives when the interest are bigger than growth and you get into a spiral of increased deficits and increased borrowing at the end the solution is to default (perhaps a good solution for Greece). The issue is that applying Austian economics once the recession hits can lead to the same result, cut spending the economy shrinks and you cut spending more and spiral down until you can no longer keep up so the country defaults on the loans. In theory with my limited understanding Kensyan runs deficits in the short run until growth catches up with spending then a country can pay off the debt, but what if the growth never arrives? Same with Austrian, countries are supposed to cut deficits to balance the budget and pay off debt, but what if that leads to decreasing the economy then what? Again with my limited understanding of economics, I think that perhaps freezing spending (not cut or increase) and wait until revenues catches up would be preferable, but what do I know, I am sure that also has downsides.
As I said, you don't understand the Keynesian model. The Keynesian model advocated stimulus and increased inflation during a liquidity trap (like the one we're in now). There is nothing in the Keynesian model that advocates endless borrowing or printing money during a normal business cycle.
Yes, if anything it's the opposite. You're meant to pay DOWN borrowing during a rise in the cycle, not keep borrowing.
I was under the impression that was implied, you know Kensyan to stimulate the economy. "Kensyan runs deficits in the short run until growth catches up with spending then a country can pay off the debt" I guess I should have said until recession pressure goes away or eases up, yes technically once the economy goes back to normal then Kensyan stimuli stops and debt is reduced.
http://www.bbc.co.uk/news/world-europe-17975660 No more Merkozy in the EU ... what a pity for the German chancellor (after she openly supported Sarkozy in the French election campaign). Tough months ahead of her now (Francois Hollande is surely gonna tell her that austerity without growth simply sucks).
For sure she must be pissed, I wonder if this brings the EU one step closer to a break up. France will now side with the Mediterranean countries isolating Germany.
The Economist: Germany needs to target higher inflation to save the Euro. http://www.economist.com/node/21554188 I actually think you can make the argument that the 2% ECB target may be too low at this point, but the general point, that Germany needs to experience higher inflation then the periphery countries is largely the point. Its simply much cleaner for Germany to inflate then for other Euro countries to internally devalue.
It won't cause the break up of the EU but it MIGHT cause the end of the euro as it's presently constituted. In all honesty the best thing for the euro would be if Germany leaves and goes back to the DM.
What's the point of Germany being part of a currency if it being in it destroys all the other countries is the better question. Actually, of course, it's not really a question of that but the idea of all economic decisions being predicated on what's best for, (or at least, acceptable to), them is nonsensical. If Germany wasn't in the euro they could do what we've done, (albeit for very different reasons), and let their currency float to a value that's a true reflection of their competitiveness, i.e. a LOT higher than the euro is now. That would make their exports less competitive for the same reasons ours are more competitive.
Well if/when Germany leaves the Euro, I am pretty sure the Euro will fall to a very competitive rate; I am sure currency speculators will make sure of that.
Very good question. A shame no one except Ambrose Evans-Pritchard ever asked questions on the euro up til a couple years ago. They have the money. A lot of people in the eurozone needs money. Golden Rule: "he with the gold makes the rules". If the rest of the eurozone states calling "unfair" didn't want size of economies to play a role in pan-continental financial decisionmaking, why were they so stupid to join the thing to begin with? That's just common sense that in stuff like this the power game will rear its ugly head. Were European politicians in the 1990s just dumb on geopolitics? I read this post elsewhere and thought it was pretty sound, so passing on: in my opinion the French and Greek electorates rejected #3 this past weekend
I hope it will force politicians to put Europeans in the center of politics instead of markets, bankers and, well, politicians. See also this
Who the feck is Ambrose Evans-Pritchard? Edit: Just looked him up.. he sounds a complete twat! In any event there were LOADS of people wittering on about how the euro would fail within weeks or months at the longest. Still, thank god Britain isn't in the euro, eh? Our outlook must be rosy I suppose... Oh! Wait... You're going for the full-on 'kindergarten' version of economics then? Economics as a morality play... that sort of thing? LOL!!!
Yes, bankruptcy is probably the best solution for a lot of our current problems. The US housing market was to a large part cleared that way. House owners just defaulted. In Spain and Ireland (and the UK) nothing like that happended. The housing markets are still far too high, the house owners are still suffering from too much debts, the banks are still in danger of collapse because they didn't write off enough. Greece was kept alive till the breaking point. The Irish government is practically bankrupt after bailing out their banks. I'm starting to think that Merkel's refusal for a European wide bank bailout at the beginning of the crisis was the biggest mistake she made. That was the best chance to cut the dangerous interdependence of national governments and their national financial sectors.
Well, we do produce enough food to feed everybody in Europe, and we can build, or even have built, enough houses to provide every European with a roof over his head. I think this is what our starting point should be, not what some 'markets' think. Next should be education and acces to knowledge (and maybe even culture), and then we can worry about the economy, and we should have plenty of resources (people's ideas, money, time for working) left for that.
Some people can't understand these sorts of ideas. Obviously it makes more sense to have empty houses and throw away millions in food every day
You have to be careful - go too far in this vein of thinking and you end with actual socialism. (And no, I don't mean "Obama" socialism.)