Paul Krugman

writes for the NY Times

Believes the US Fed needs to spend it’s way out of depression

argues that:

austerity is based on the false premises that spending will trigger bond vigilantes

must provide stimulus today, then impose restraint when output is up

historical cases of cuts leading to growth?

in all cases, negative affects of cuts were offset by other factors

eg: Ireland in 80’s, growth came from exports

not something every nation can do

now back in the slump, due to cuts

counterargument:

bond vigilantes are not the reason for cuts

they are a natural response to expectations of low productivity

cuts are necessary for all spending that is not productive

the lender needs to trust in a future in which the money is used profitably

borrowing needs to go in cycles

borrow money

use the money profitably

pay back the money plus some of the profits

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