Saturday, May 15, 2010

MisIMFormation? - Paul Krugman on the IMF Report

MisIMFormation? - Paul Krugman
The latest from the IMF, which is a survey of the fiscal health of various nations, is a heavy read but Krugman's deciphering is so good I really recommend reading at least Krugman's analysis.
In short, the debt crisis of the worlds advanced nations is not the result of over spending but real structural changes in these economies that has significantly reduced revenues. This is such a no-brainer if you look at the recent history of the United States. The Clinton surplus was the result of actual increased wealth of the entire nation. The Bush deficits and the inherited deficits of the Obama administration are the result of a radical loss of wealth in the economy.
In other words what changes is government revenues as a result of economic changes while spending stays the same. The response is then to find a level spending level and ride out the storm.
I think this is a real clarion call to cease these crazy calls for reduced spending.

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