Econflict Deepens: Reinhart, Rogoff Strike Back At "Hyperbolic" Krugman

Tyler Durden's picture

Just when you thought the R&R debate was finished, it seems Paul Krugman's latest "spectacularly uncivil behavior" pushed Reinhart and Rogoff too far. In what can only be described as the most eruditely worded of "fuck you"s, the pair go on the offensive at Krugman's ongoing tete-a-tete. "You have attacked us in very personal terms, virtually non-stop...  Your characterization of our work and of our policy impact is selective and shallow.  It is deeply misleading about where we stand on the issues.  And we would respectfully submit, your logic and evidence on the policy substance is not nearly as compelling as you imply... That you disagree with our interpretation of the results is your prerogative.  Your thoroughly ignoring the subsequent literature... is troubling.   Perhaps, acknowledging the updated literature on drawbacks to high debt-would inconveniently undermine your attempt to make us a scapegoat for austerity."

Finally, they exclaim, "we attach, as do many other mainstream economists, a somewhat higher weight on risks than you do, as debts of all measure - including old age liabilities, public debt, private debt and external debt - ascend into record territory." This is not a conclusion based on one or two papers as Krugman sometimes seem to imply, but rather on a long-standing body of economic research and extensive historical experience about the risks of record high debt levels.


Via Carmen Reinhart's blog,

Dear Paul:


Back in the late 1980s, you helped shape the concept of an emerging market debt overhang.  The financial crisis has laid bare the fact that the dividing line between emerging markets and advanced countries is not as crisp as once thought.  Indeed, this is a recurring theme of our 2009 book, This Time is Different:  Eight Centuries of Financial Folly.  Today, the growth bind of advanced countries in the periphery of the eurozone has a great deal in common with that of emerging market economies of the 1980s.


We admire your past scholarly work, which influences us to this day.  So it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks.  You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts.  Now you have doubled down in the New York Review of Books, adding the accusation we didn't share our data.  Your characterization of our work and of our policy impact is selective and shallow.  It is deeply misleading about where we stand on the issues.  And we would respectfully submit, your logic and evidence on the policy substance is not nearly as compelling as you imply.


You particularly take aim at our 2010 paper on the long-term secular association between high debt and slow growth. That you disagree with our interpretation of the results is your prerogative.  Your thoroughly ignoring the subsequent literature, however, including the International Monetary Fund's work as well as our own deeper and more complete 2012 paper with Vincent Reinhart, is troubling.   Perhaps, acknowledging the updated literature-not to mention decades of theoretical, empirical, and historical contributions on drawbacks to high debt-would inconveniently undermine your attempt to make us a scapegoat for austerity.  You write "Indeed, Reinhart-Rogoff may have had more immediate influence on public debate than any previous paper in the history of economics."


Setting aside this wild hyperbole, you never seem to mention our other line of work that has surely been far more influential when it comes to responding to the financial crisis.  Specifically, our 2009 book (released before our growth and debt work) showed that recoveries from deep systemic financial crises are long, slow and painful.  This was not the common wisdom at all before us, as you yourself have acknowledged  on more than one occasion.  Over the course of the crisis, and certainly by 2010, policymakers around the world were using our research, alongside their assessments, to help justify sustained macroeconomic easing of both monetary and fiscal policy fronts.


Your desire to blame our later 2010 paper for the stances of some politicians fails to recognize a basic reality:  We were out there endorsing very different policies.  Anyone with experience in these matters knows that politicians may float a citation to an academic paper if it suits their purposes.  But there are limits to how much policy traction they can get with this device when the paper's authors are out offering very different policy conclusions.  You can refer to the appendix to this letter for our views on policy through the financial crisis as they were stated publicly in real time.  We were not silent.


Very senior former policy makers, observing the attacks of the past few weeks, have forcefully explained that real-time policies are very seldom driven to any significant extent by a single academic paper or result.


It is worth noting that in the past, polemicists have often pinned the austerity charge on the International Monetary Fund for its work with countries having temporary or permanent debt sustainability issues.  Since its origins after World War II, IMF programs have almost always involved some combination of austerity, debt restructurings, and structural reform.  When a country that has been running large deficits is suddenly no longer able to borrow new funds, some measure of adjustment is invariably required, and one of the IMF's usual roles has been to serve as a lightning rod.   Even before the IMF existed, long periods of autarky and hardship accompanied debt crises.


Now let us turn to the substance. The events of the past few weeks do not change basic facts and fundamentals. 


Some Fundamentals on Debt

First, the advanced economies now have levels of debt that surpass most if not all historic episodes. It is public debt and private debt (which often becomes public as a crisis unfolds). Significant shares of these debts are held by foreigners in most cases, with the notable exception of Japan.  In Europe, where the (public and private) external debt exposures loom largest, financial de-globalization is well underway.  Debt financing has become an increasingly domestic business and a difficult one when the pool of domestic saving is limited.


As for the United States: our only short-lived high-debt episode involved WWII debts, which were held by domestic residents, not fickle international investors or central banks in China and elsewhere around the globe.  This observation is not meant to suggest "a scare" in the offing, with bond vigilantes driving a concerted sell-off of Treasuries by the rest of the world and a dramatic spike US in interest rates.  Carmen's work on financial repression suggests a different scenario. But many emerging markets have stepped into bubble-like territory and we have seen this movie before.  We should not take for granted their prosperity that makes possible their continuing large-scale purchases of US debt.  Reversals are possible.  Sensible risk management means planning for these and other contingencies that might disturb today's low global interest rate environment.


Second, on debt and growth.  The Herndon, Ash and Pollin paper, using a different methodology, reinforces our core result that high levels of debt are associated with lower growth.  This fact has been hidden in the tabloid media and blogosphere discourse, but this point is made plain by even a cursory look at the full set of results reported in the very paper they critique.  More importantly, the result was prominently featured in our 2012 Journal of Economic Perspectives paper with Vincent Reinhart on Debt Overhangs, which they do not cite. The main point of our 2012 paper is that while the difference in annual GDP growth between high and lower debt cases is about one percent a year, debt overhang episodes last on average 23 years. Thus, the cumulative effect on income levels over time is significant.


Third, the debate of the last few weeks does not change the fact that debt levels above 90% (even if one entirely rejects this marker for gross central government debt as a common cross-country "threshold") are very rare altogether and even rarer in peacetime.  From 1955 until right before the recent crisis, advanced economies spent less than 10% of those years at a debt/GDP ratio of higher than 90%; only about two percent of the years are above 120% debt/GDP. If governments thought high debt was a riskless proposition, why did they avoid it so consistently?


Debt and Growth Causality

Your recent April 29, 2013 NY Times blog The Italian Miracle is meant to highlight how in high-debt Italy, interest rates have come down since the European Central Bank's well-placed efforts to act more as a lender of last resort to periphery countries.  No disagreement there. However, this positive development is meant to re-enforce your strongly held view that high debt is not a problem (even for Italy) and that causality runs exclusively from slow growth to debt.  You do not mention that in this miracle economy, GDP fell by more than 2 percent in 2012 and is expected to fall by a similar amount this year. Elsewhere you have stated that you are sure that Italy's long-term secular growth/debt problems, which date back to the 1990s, are purely a case of slow growth causing high debt.  This claim is highly debatable.


Indeed, your repeatedly-expressed view that slow growth causes high debt but not visa-versa, is hardly supported by the recent literature on the subject.  Of course, as we have already noted, this work has been singularly ignored in the public discourse of the past few weeks.  The best and worst that can be said is that the results are mixed.  A number of studies looking at more comprehensive growth models have found significant effects of debt on growth. We made this point in the appendix to our New York Times piece.  Of course, it is well known that the economic cycle impacts government finances and therefore debt (causation from growth to debt).  Cyclically adjusted budgets have been around for decades, your shallow characterization of the growth-debt connection.


As for ways debt might affect growth, there is debt with drama and debt without drama.


Debt with drama.  Do you really think that a country that is suddenly unable to borrow from international capital markets because its public and/or private debts that are a contingent public liability are deemed unsustainable will not suffer lower growth and higher unemployment as a consequence? With governments and banks shut out from international capital markets, credit to firms and households in periphery Europe remains paralyzed. This credit crunch has a crippling effect on growth and employment with or without austerity.  Fiscal austerity reinforces the procyclicality of the external and domestic credit crunch.  This pattern is not unique to this episode.


Policy response to debt with drama.  On the policy response to this sad state of affairs, we stress that restoring the credit channel is essential for sustained growth, and this is why there is a need to write off senior bank debt in many countries. Furthermore, there is no reason why the ECB should buy only sovereign debt-purchases of senior bank debt along the lines of the US Federal Reserve's purchases of mortgage-backed securities would be instrumental in rekindling credit and working capital for firms.  We don't see your attraction to fiscal largesse as a substitute. Periphery Europe cannot afford it and for Germany, which can afford it, fiscal expansion would be procyclical.  Any overheating in Germany would exert pressure on the ECB to maintain a tighter monetary policy, backtracking some of the progress made by Mario Draghi. A better use of Germany's balance sheet strength would be to agree on faster and bigger haircuts for the periphery, and to support significantly more expansionary monetary policy by the ECB.


Debt without drama.  There are other cases, like the US today or Japan since the mid-1990s, where there is debt without drama.  The plain fact that we know less about these episodes is a point we already made in our New York Times piece.  We pointedly do not include the historical episodes of 19th century UK and Netherlands among these puzzling cases. Those imperial debts were importantly financed by massive resource transfers from the colonies. They had "good" high-debt centuries because their colonies did not.  We offer a number of ideas in our 2012 paper for why debt overhang might matter even when there is no imminent collapse of borrowing capacity.


Bad shocks do happen. What is the foundation for your certainty that as peacetime debt hits new records in coming years, the United States will be able to engage in  forceful countercyclical fiscal policy if hit by a large unexpected shock?  Furthermore, do you really want to find out the answer to that question the hard way?


The United Kingdom, which does not issue a reserve currency, is more dependent on its financial sector and suffered a bigger banking bust, has not had the same shale gas revolution, and is more vulnerable to Europe, is clearly more exposed to the drama scenario than the US.  And yet you regularly assert that the situations in the US and UK are the same and that both countries have the costless option of engaging in an open-ended fiscal expansion.  Of course, this does not preclude high-return infrastructure investments, making use of the public balance sheet directly or indirectly through public-private partnerships.


Policy response to debt without drama.  Let us be clear, we have addressed the role of somewhat higher inflation and financial repression in debt reduction in our research and in numerous pieces of commentary.  As our appendix shows, we did not advocate austerity in the immediate wake of the crisis when recovery was frail.  But the subprime crisis began in the summer of 2007, now six years ago.  Waiting 10 to 15 more years to deal with a festering problem is an invitation for decay, if not necessarily an outright debt crisis.  The end may not come with a bang but with a whimper.


Scholarship: Stick to the facts

The accusation in the New York Review of Books is a sloppy neglect on your part to check the facts before charging us with a serious academic ethical infraction.  You had already implicitly endorsed this from your perch at the New York Times by posting a link to a program that treated the misstatement as fact.


Fortunately, the "Wayback Machine" crawls the Internet and periodically makes wholesale copies of web pages. The debt/GDP database was first archived in October 2010 from Carmen's University of Maryland webpage.  The data migrated to in March 2011.  There it sits with our other data, on inflation, crises dates, and exchange rates.  These data are regularly sought and found for those doing research who care to look. The greater disclosure of debt data from official institutions is testament to this.  The IMF began to construct historical public debt data only after we had provided a roadmap in the list of our detailed references in a 2009 book (and before that in a 2008 working paper) that explained how we had unearthed the data.


Our interaction with scholars and practitioners working on real world questions in our field is ongoing, and our doors remain open. So to accuse us of not sharing our data is an unfounded attack on our academic and personal integrity.



Finally, we attach, as do many other mainstream economists, a somewhat higher weight on risks than you do, as debts of all measure -- including old age liabilities, public debt, private debt and external debt -- ascend into record territory.   This is not a conclusion based on one or two papers as you sometimes seem to imply, but rather on a long-standing body of economic research and extensive historical experience about the risks of record high debt levels.


You often cite John Maynard Keynes.  We read Keynes, all the way through.  He wrote How to Pay for the War in 1940 precisely because he was not blasé about large deficits - even in support of a cause as noble as a war of survival. Debt is a slow-moving variable that cannot - and in general should not - be brought down too quickly.  But interest rates can change much more quickly than fiscal policy and debt.


You might be right, and this time might be, after all, different.  If so, we will admit that we were wrong.  Whatever the outcome, we intend to be there to put the results in proper context for the community of scholars, policymakers, and civil society.


Respectfully yours,


Carmen M. Reinhart and Kenneth S. Rogoff

Harvard University.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
dracos_ghost's picture

Meh, a from the gutter literal "Fuck You" would be better. Krugman deserves no professional courtesy.

Popo's picture

All in all, I thought that was an exercise in civility with a dash of shoulder shrugging and a "Who knows?" to wrap it up.   I saw no real "Fuck you" to Krugman, as much as I would have liked to.


mikla's picture

This was a direct (and loud) "FU" in the voice of the academic community.

Yes, agreed, we would often prefer they speak directly; but, that's not what that community does.

They speak differently because ... academics are, in fact, quite different.  There is a very careful ritual by which they posit original thought (which is also why academia so rarely provides original thought).

Note that I did not imply their "difference" as "smarter" or "more-honest", as dramatically illustrated by Krugman himself.

Pool Shark's picture



Krugman pontificating on the lack of negative effects from deficit spending and debt is like listening to the guy who just jumped off the Empire State Building as he passes the 27th floor:

"So far, so good..."


While the rational among us have a pretty good idea of how this movie ends...


kchrisc's picture

Yes and no.

The guy jumping is the only one that pays from his delusion.

Krugman on the other hand is like the guy below yelling "jump, it won't hurt." However, Krugman is not delusional but is motivated by greed, monetary and career, and sociopathic indifference.

mikla's picture

Krugman is the guy who pushed the jumper out the window, shouting, "It's for your own good!"

The joys of "Control Fraud" is that Krugman will not suffer the consequences of his delusions.

Manthong's picture

Keying off of an concept from Professor Peter Boettke in his excellent recent book “Living Economics” ..

The deprivation and misery of austerity that is expanding throughout the world as a result of Krugman’s Tunisian boy lover idol, Keynes and his destructive policy theories should inspire Krugman to write a book titled “An inquiry into the Nature and Causes of the Poverty of Nations”.

Nature and nature’s God knows he is an expert on that subject and the world is proving it now.

All Risk No Reward's picture

Krugman works for the criminal debt pushers.  They finance his New York Times rag and they don't hire people who will bite the hand that feeds them.


This is what Krugman, and the rest of the debt money pushers, hide from society:

Debt Money Tyranny - you've been punked

Weapons of Mass Debt - Proof Bernanke is a criminal...  actually, Bernanke's handlers are criminals and he's a willing puppet of the power structure:

In a real world, the crimes of the Federal Reserve woudl win a Pulitzer Prize.

Who finances the Pulitzer Prize, again?  Make a tyrant made - THINK!

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
? Napoleon Bonaparte

asteroids's picture

R&R respond through academic journals. The Kruuugmann attacks throught main stream media. Far more dangerous. Riddle me this Kruuugmann who the fuck is buying all that Japanese debt? Internal consumption must have been exhausted years ago. The average man only has so much yen in his bank account.

bank guy in Brussels's picture

Reinhart and Rogoff indeed have their panties tied in a knot, but they are so weak in some points above, they actually leave room for Krugman.

Would rather see Hugh Hendry and Marc Faber having a good discussion after a few drinks in a Thailand bar, I think


But as regards Reinhart and Rogoff above:

As R and R quibble about the EU, they ignore the elephant in the room, that the euro currency is a colossal catastrophe, which Krugman is much closer to implicitly acknowledging in his critique of EU policies.


And in the piece above, Reinhart and Rogoff essentially admit the core flaw in their own position ... there are actually cases in the past, which they find 'puzzling', of course, because of their own pet theories, of countries having totally 'to the moon' debt loads, and getting out of them successfully

Like the UK after Napoléon, which had debt loads the size of Japan right now ... and there was never any 'collapse', the debt worked itself out over time.

Reinhart and Rogoff try to fluff this off, saying, well, these countries had colonies and stole resources

But that is what many wealth countries still do, 'steal resources' from other countries and from labour forces that are essentially 'colonised' ...

Western people wear fancy designer clothing made by workers in Bangladesh dying in unsafe factories and earning merely a few pennies for food ...

That is 'colonisation' just the same, despite Bangladesh being an 'independent' country


Instead of professors sniping at each other, let's indeed have Hendry and Faber in that Thailand bar ...

Tulpa's picture

"essentially" -- the preferred word of people who can't back up what they're claiming.

HUGE difference between the way colonies were exploited and the way developing countries are paid today.  Those clothing-manufacture jobs, which you or I would consider a living hell, are among the best that exist in Bangladesh.  If you think that's "essentially" equivalent to colonialism, I suggest you educate yourself on what life in the 19th century colonies was like.

And I'm paying a ton at the pump for those resources "stolen" from other countries; somehow the sheiks and other victims of that theft are among the richest people in the world, too.

James_Cole's picture



"essentially" -- the preferred word of people who can't back up what they're claiming.


To make it crystal clear for you IT'S EXACTLY THE FUCKING SAME. That help?


"Colonialism is a relationship between an indigenous (or forcibly imported) majority and a minority of foreign invaders. The fundamental decisions affecting the lives of the colonized people are made and implemented by the colonial rulers in pursuit of interests that are often defined in a distant metropolis. Rejecting cultural compromises with the colonized population, the colonizers are convinced of their own superiority and their ordained mandate to rule." 

"Exploitation colonialism involves fewer colonists and focuses on access to resources for export, typically to the metropole. This category includes trading posts as well as larger colonies where colonists would constitute much of the political and economic administration, but would rely on indigenous resources for labour and material. Prior to the end of the slave trade and widespread abolition, when indigenous labour was unavailable, slaves were often imported to the Americas, first by the Portuguese Empire, and later by the Spanish, Dutch, French and British."

Those clothing-manufacture jobs, which you or I would consider a living hell, are among the best that exist in Bangladesh. 



Gawd you're a moron. 



Tulpa's picture

I guess I need more crystal-clarity from you; what part of your argumentum-ad-Wikipediam has to do with modern Bangladesh?

James_Cole's picture

Spending two seconds on wikipedia too much of a chore?

Critics of neo-colonialism also argue that investment by multinational corporations enriches few in underdeveloped countries, and causes humanitarianenvironmental and ecological devastation to the populations which inhabit the neocolonies whose "development" and economy is now dependent on foreign market's and large scale trade agreements. This, it is argued, results in unsustainable development and perpetual underdevelopment; a dependency which cultivates those countries as reservoirs of cheap labor and raw materials, while restricting their access to advanced production techniques to develop their own economies. In some countries, privatization of national resources, while initially leading to immediate large scale influx of investment capital, is often followed by dramatic increases in the rate of unemployment, poverty, and a decline in per-capita income.

When you're refering to 'garmet factories' in Bangladesh, this is what you're actually talking about, the garment factories are not in 'Bangladesh' so to speak they're in EPZ:

Free trade zones are domestically criticized for encouraging businesses to set up operations under the influence of other governments, and for giving foreign corporations more economic liberty than is given indigenous employers who face large and sometimes insurmountable "regulatory" hurdles in developing nations

Sometimes the domestic government pays part of the initial cost of factory setup, loosens environmental protections and rules regarding negligence and the treatment of workers, and promises not to ask payment of taxes for the next few years. When the taxation-free years are over, the corporation that set up the factory without fully assuming its costs is often able to set up operations elsewhere for less expense than the taxes to be paid, giving it leverage to take the host government to the bargaining table with more demands, but parent companies in the United States are rarely held accountable.

Read about how this works in Bangladesh specifically:

Bring the Gold's picture

You act as though common brits in 19th century England somehow saw almost any of the wealth that cascaded in from the colonies. Much the same, you as a peon will get pumped at the pump. Those sheiks are the point of the sword of modern colonialism as you must have the local government undercontrol via controlling the local elites whom you reward richly. Meanwhile the rest of said people will live in utter hell as you describe.

The entire global financial system is built on keeping people like the bangladeshi's poor. Since there is no area in which to move for cheaper labor the middle class in the industrialized world has been raped and now onto the top 10%. Soon only the hyper elites will have any money and power and the colonization of the entire planet by the 0.0000000001% banking families etc. will be complete.

He is absolutely spot on. Colonialism differs only in using british hired guns to enforce enconomic and environmental rape, Globalization achieves the same using domestic forces.

This can be stopped, but ignorance of reality like yours only aids and abets this plan.

TuPhat's picture

James-cole You don't seem to know much.  Been there have you?

All Risk No Reward's picture

Tulpa, why are those the best jobs that exist in those areas?

Does the fraudulent, debt based monetary system play a role?

Debt Money Tyranny - you've been punked....

Britian got out of its debt trouble after Napoleon simply because it served the interests of the financial criminals running their operation out of Britain.  I'm sure much of the nation's wealth was stolen from the productive and transferred to the debt money criminals in the process.

Read Tragedy and Hope Chapter 19 to get a feel how the real world works...  the whole book is excellent...

Pool Shark's picture



"Like the UK after Napoléon, which had debt loads the size of Japan right now ... and there was never any 'collapse', the debt worked itself out over time."

R & R correctly point out that the UK still had an empire with colonies to exploit during the 19th century. I daresay modern western civilizations aren't so 'lucky.'


verum quod lies's picture

You are correct. One also needs to remember that all three are essentially Keynesians of one stripe or another (Krugman being more hardcore and ignoring evidence in favor of 'economic theory' vs. Reinhart and Rogoff being more empirically oriented). All in all, they used the same professional courtesy you'd see lawyers or sharks show each other after the water was chummed, in short hardly a f___ you.

TheReplacement's picture

Correct me if I'm wrong but we have a couple of centrally managed economy guys going after another centrally managed economy guy because they disagree on how to centrally manage the economy.  F'em all.  If I'm wrong, F'me.

akak's picture

Smack my (Keynesian) bitch up!

williambanzai7's picture


Paul dabbled in the occult

The spirit of Keynes he'd consult

He was told in a trance

To help debt advance

With a system collapse the result

The Limerick King

New World Chaos's picture

Bwahahahahah!  One of your best ever!

Dear Puppetmasters:  Please, please, please make Krugman be the next Fed chairman.  I am sick of waiting for the Apocalypse.

machineh's picture

Many were hoping that Jeffrey Skilling would be pardoned and released from prison in time to take the helm at the Fed.

But the timing is getting tight. ;-(

FEDbuster's picture

and Madoff as Secretary of the Treasury/Debt.

Peter Pan's picture

The cross eyes did it for me although I think a dunce cap is missing.

Killer the Buzzard's picture

Worthy to hang at the Met or the Louvre.

piceridu's picture

Awesome WB7! buy what I really want to know, who the eff down arrowed you?

New World Chaos's picture

One junk was from our DailyKos junkbot warrior, who was offended by such blasphemy against Krugman.  Another was from our SPLC infiltrator, offended by the Hebrew letters around the pentagram.  Expect a lawsuit for such blasphemy against the chosen people.  Another junk was from a satanist who took offence at associating satan with a retard like Paul Krugman.  They usually don't care about such things, but the greatest satanic sin is stupidity, so they might see this mocking pic as a great blasphemy.  Finally, last and least, we have a junk from the Petulant Retard Himself.

williambanzai7's picture

When I see those down arrows the mission accomplished light starts blinking because it means the payload has hit a target.

Alan Greenspam has just written another book titled The Map, The Territory, which is a bastardization of Alfred Korzybski's quote: The map is not the territory.

The map certainly is not the territory, and it is amazing how much time and attention is wasted arguing about different maps by PhD map makers like Mr K who has absolutely no idea how the territory works.

M2Market's picture

Awesome!  Totally Awesome!

brettd's picture

Explain how 600 billion in stimulus and 2T in QE is Austerity, please.

While we're at it, perhaps Paul can explain how we spent all that money and have 10 million unemployed and bridges colapsing across the USA.

It's just stupid.

elwu's picture

"perhaps Paul can explain how we spent all that money and have 10 million unemployed and bridges colapsing across the USA"

He answered this already, several times: "too little, too late" is since years his standard excuse whenever deficit spending failed again.

And for all future cases in which deficit spending will fail again, he already used this 'argument' globally, pre-emptively.

bank guy in Brussels's picture

Deceptive, ambiguous ZeroHedge word game on the concept of 'austerity' is misleading everyone, and needs to be clarified

Two extremely DIFFERENT meanings of 'austerity'

austerity (a) - lower gov't spending overall - This is NOT what is meant in almost any article about Europe, for example, or in the Reinhart-Rogoff-Krugman debate

austerity (b) - ravaging, life-destroying cuts in worker incomes, worker pensions, or minimal benefits for a decent life, while government debt and budgets are loaded up and increased to pay interest to banks and banksters - THAT is the MEANING of 'austerity' as millions of Europeans know it and suffer it

And austerity (b) is the reason why anti-euro parties are forming and surging, and while the euro-zone is going to explode into pieces before too long

ZH articles typically pretend it is about the non-existent austerity (a) and not the actual, life-devastating austerity (b)

Tulpa's picture

The spendthrifts (like Mr Krug) in the US are using definition (a) so it's no surprise that a US-based website uses that definition.  Krugman regularly refers to cutbacks in govt spending, or even cuts to the growth rate of spending, as austerity.

kchrisc's picture

austerity (c) - The elimination, by guillotine or masonry wall, of the parasites and criminal thieves and murderers that steal, kill and burden the people and producers of an economy with impoverishment and death.

Oldwood's picture

 Krugman, like "bank guys" profit from the continuation of their "policies" and general theories. Short of forcing banks to take it in the ass, everyone else will suffer from austerity. Be it reductions in jobs and wages or devaluation of their earnings and savings from inflation. The financial business and its codependent branch, government, will do whatever it takes to stay on top, no matter how low we all have to go. Taxes are on the increase as well as tax collection enforcement is on the rise around the world so don't talk about different types of austerity. We know who will pay and it won't be a banker or government henchman unless they suddenly have a stroke on conscience ovecome them. I'm not holding my breath. In the mean time we are watching while these criminals do whatever they can to corrupt any and all to participate as they make it increasingly clear all who do not will be the losers. Of course, with all corruption, when left to mature, will be the end of all of us.

ekm's picture

There is no difference, none whatsoever between a and b and I'd say both are erroneous.


The real reason there is austerity is because markets are imposing austerity on countries and govs have no other choice.

Austerity is a choiceless choice


Govs will spend whatever they have and will slow spending each time they don't have anything to spend.

Freddie's picture

The money was stolen and looted.  I would guess a lot of it went to prop up Detroit, Chicago, LA, California, NY et al. Unions and defense contractors got a lot of it.   The bridges?  The states and counties should be taking care of that shit.

Someobody blow up that picture of Krugman's head being lopped off by that academic sword. I would pay good fiat money to see that.

TheFourthStooge-ing's picture


Someobody blow up that picture of Krugman's head being lopped off by that academic sword. I would pay good fiat money to see that.

Give this a try:

SoundMoney45's picture

Ludwig von Mises wrote some intellectually stimulating material, I suggest the Paul Krugman log out of Twitter and Facebook and spend a few hundred hours studying.

nmewn's picture

Being a Keynesian means, never having to say you're sorry for fucking up everything you touch.

LetThemEatRand's picture

Being an economist means never having to say you're sorry for fucking up everything you touch.   To modify a tired expression, these guys are debating the song the band should play as the Titanic goes down.

nmewn's picture

Maybe I wasn't clear.

Being a Fabian economist means, never having to say you're sorry for destroying entire societies while telling them its for their own good and getting wealthy in the process.

solgundy's picture

Rule 4: Make opponents live up to their own book of rules. “You can kill them with this, for they can no more obey their own rules than the Christian church can live up to Christianity.”

Rule 5: Ridicule is man’s most potent weapon. It’s hard to counterattack ridicule, and it infuriates the opposition, which then reacts to your advantage.

Rule 6: A good tactic is one your people enjoy. “If your people aren’t having a ball doing it, there is something very wrong with the tactic.”

Rule 7: A tactic that drags on for too long becomes a drag. Commitment may become ritualistic as people turn to other issues.

Rule 8: Keep the pressure on. Use different tactics and actions and use all events of the period for your purpose. “The major premise for tactics is the development of operations that will maintain a constant pressure upon the opposition. It is this that will cause the opposition to react to your advantage.”

Mi Naem's picture

So, who are you suggesting is the Alinsky fan, Krugman or you?

TeamDepends's picture

Ridicule IS man's most potent weapon.  Here's one:  Monsanto makes sense, if you want to kill everything.