Economy Lesson From Greece, After The Poor Japan Outlook

Again, I’m far from an economist, having taken just one economics course in my entire life. That does not mean that I cannot make judgments on others’ arguments. Especially when I’m dealing with a Nobel Prize winner in economics, Paul Krugman.

My two prior posts, Inflation? and Is Japan Economy Precedent for U.S.? address inflation possibilities. We now have plenty of information to analyze the Greek situation. Krugman, in the 4/8/10 NYTimes article, “Learning from Greece”, runs through the current situation and then asks what the lessons for America are? (Of course you can all look up the article and study it yourselves, this is just a placeholder.)

First, is (of course) fiscal responsibility, and who can argue with that?  Well, ever since the bottom fell out of our economy, what Krugman means by fiscal responsibility is not “penny-pinching over short-term spending to help a distressed economy”, which is the right’s mantra. Greece was hurt by cross-currency issues, but Japan is in dire straits even with its own currency, so that’s not the real problem.  What Krugman really worries about are sources like the one I quoted in my Inflation? post,  “the rising clamor from inflation hawk’s who want the Fed to raise rates and the federal government to pull back from stimulus, even though employment has barely started to recover”. He says that if these hawks get their way, the result will be mass unemployment, and America’s public debt will not be manageable!

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