Austerity without growth a guarantee of stagnation

@ John McHale

Thanks for that. On Alesina:

“Keynes vs. Alesina. Alesina Who?”

http://www.businessweek.com/magazine/content/10_28/b4186012969951.htm

And:

“Revisiting the evidence on expansionary fiscal austerity: Alesina’s hour?”

“First, we assume that Alesina – and his co-author’s contributions – are methodologically sound and based on robust empirical evidence. We point out that, even in this best case scenario, the thesis of ‘expansionary fiscal austerity’ is found to be valid in a minority of cases. We then briefly review the methodological critique of Alesina’s work. Such critique ranges from elementary factual errors in at least one of the historical case studies that have been undertaken by the author and his collaborators (Australia) to the pitfalls that follow from ‘omitted variables’ when studying the impact of fiscal policy on aggregate economic activity.

“We conclude by suggesting that the findings of Alesina and his collaborators resonate so strongly with at least some policy makers because of an ideological aversion to counter-cyclical fiscal policy. This ideological aversion is reinforced by lack of accountability among technocrats who design policy experiments based on fragile evidence but are typically not held accountable for the consequences of such experiments.”

http://www.voxeu.org/index.php?q=node/7679

I’m having difficulty finding the link, but I believe the Central Bank of Spain has also released a recent research paper looking again at supposed incidents of expansionary fiscal contraction.

Its nice but it won’t achieve much of consequence as it does not deal with this poisonous kleptocratic monetory and now fiscal envoirment.

“The remaining money in the National Pension Reserve Fund (€5.4 billion) should be used to fund such investments, and we should proactively lobby at European level for a dramatic expansion in the lending capacity of the European Investment Bank. Private pension funds are also a potential source of financing commercial-return investment. Consideration should also be given to utilising a portion of the €15 billion held by the Government in cash and other assets”

Its time to dump all of these agencies – I am very uncomfortable with the EIB becoming a quasi fiscal agent as the only organisation capable of producing paper at scale.

Its time for states to produce money again , hopefully their treasuries rather then the CBs – or at least give the banks a very junior position as one solitary desk under the exchequers rule as Friedman imagined.

This begging for cash is beneath us and is the definition of a non sovergin entity.
30+ years of domestic economy destruction is enough time to test this absurd European experiment to destruction don’t you think ?

We appeared to do well at the start with Fiscal transfers & all….. that first bought the farmers and then subseqently moved up the food chain but now these shadowey actors are in the extraction mode, -now that the country no longer has any redundancy it can be done with no apparent resistance.
We need to completly renationalise european monetory systems…….we can then transact on a rational basis both internally and externally with other countries.
Anything less now is a acceptance of the Dark Power.

Its rather simple. 120%-140% debt to gdp ratios requiring burden sharing. The ECB is dead set against this. Its answer is austerity. Unfortunately, this policy not only gives austerity a bad name, it renders counter cyclical policies also redundant.

Why have ‘six packs’, austerity for economies if the financial sector, the elephant in the room, is running amok through liberalisation, deregulation, no control for the financial sector as it eats market economies from within. Regulation, a ‘six pack’ curbing the shadow banking derivative market are required, alongside realistic burden sharing for debt profiles such as ours.

Re “The authors argue for a mix that involves higher capital spending and higher taxation aimed primarily at higher income individuals.”

The authors, if they do not argue for burden sharing, bringing debt to manageable levels through default. If they ignore financial markets and global reforms required including the need for burden sharing, cannot bring debt profiles of the order of 120-140% into control.

Chomsky writes on consequences of not doing this here describing ‘Assault on Public Education’ in US, its coming your way here as well:

http://www.nationofchange.org/assault-public-education-1333634007

“Claims are also made about the alleged benefits of the radical expansion of financial institutions since the 1970s. A more convincing description was provided by Martin Wolf, senior economic correspondent for The Financial Times: “An out-of-control financial sector is eating out the modern market economy from inside, just as the larva of the spider wasp eats out the host in which it has been laid.”

The EPI study observes that the “Failure of Design” is class-based. For the designers, it has been a stunning success, as revealed by the astonishing concentration of wealth in the top 1 percent, in fact the top 0.1 percent, while the majority has been reduced to virtual stagnation or decline.

Another Excellent piece from Steve of Virgina.
Countries or at least their NCBs can produce base Euros now – can they not ? – this will promote more efficient use of resourses….more base euros to counter the decline in domestic M1 anyhow which is shocking.

Some Quotes (I think credit is the production of base euros by his defination)
“This shortage of euros IS the credit crisis not the outcome of it. The absence of euros feeds on itself: the shortage multiplies demand for available euros and their cost in credit markets. Euros are hoarded or removed from the marketplace which pushes credit costs higher still. This isn’t debt-deflation so much as it is a deliberate policy of credit strangulation.”
“Since credit isn’t a natural resource and can be created in virtually unlimited quantities, shortages of credit are matters of policy or corruption. In the Eurozone, the absence of liquidity is the small matter of an absent fiscal structure. There is no European ‘federal government’ to provide euros. Only the national governments and the private sector can create credit: the private sector refuses and precious rules inhibit the nations themselves from doing so themselves”

“From this particular vantage point, the euro becomes the instrument of credit fraud like a sub-prime mortgage. Policy failure on the part of the European Union is to not have a lender of last resort: the fact of such an absence after ten years of euro speaks for itself.”

The sovereign is vulnerable: the borrower must take on debt denominated in the country’s native currency. Otherwise, all of his debts are external, at the pleasure of repayment on the lenders’ terms in the lenders’ currency! Here is the set trap at the center of the eurozone: no country within the Eurozone who carefully follows its rules has the use of its own currency. The euro is no-nation’s currency and all debts denominated in euros are external debts. Each Eurozone country is held hostage to private lenders: in a practical sense every European country is a colony of the finance industry.
“It is that industry that sets money rates at any given time because there is no public competition, no alternative bid. Governments lack the structural means to control their own destinies. If ‘investors’ collude so as to refuse to lend for any reason at all … there is no agency to lend in their place and compel a bid”.
“What the foregoing insists is that European nations cannot survive their human or corporate creditors … which is astonishing and suggestive. The demand is exercised that Greece in a multi-year recession must repay finance-level debts that are beyond the ability of any economy to retire and to do so at once without any support. This indicates that Greece is expected to expire: there is no other possible explanation”.

@Eureka
“Europe has been taken over by bankers. Democracy has been used and subverted to meet the needs of bankers. Goldman Sachs evil empire extends across the continent. There is no choice but to sit tight and do as we’re told. Europe for the people is dead. It will split.”
+1

Except that bankers just hold the financial assets of increasingly globalised wealthy people. What we are witnessing is rich folk holding onto to their wealth come what may. That includes socialising any losses. The wealthy simply will not accept losses. Profits, yes. Losses, no.
And yes, if Europe continues on its current path of complete subservience to the financial elite and creditor nations, then it will break. And it could be an ugly breakup.

On the article itself.

While the approach makes sense, the learned gentlemen and ladies would have a lot more credibility if they spelled out specific tax policies rather than generalizations. My perception of a high income group is probably what most of these earn. I doubt if that would be their perception.

“Pre-primary education, upskilling, next generation broadband, research and development and renewable energies – these types of productive investment can result in new economic opportunities, enhanced social equity and environmental sustainability.”

Really? The people we need to get back to work are in the majority construction workers. There are over 2000 unfinished estates with as I recall approx 180,000? unfinished properties throughout the country.
The country needs a program to finish the better located of these buildings and put these construction workers back to work.
Residential rents are still rising while construction workers languish on the dole. Put the workers back back to work and force rents down.
It is time to dump the landlord class and if they bring the banks down (again) with them, well too bad.

@Jagdip

IFAC’s mandate does not extend to assessing the overall case for particular measures with significant distributional implications, where value judgements are unavoidable. In terms of assessing budgetary projections, I see our mandate as consistent with looking at the fiscal/macro impacts of particular measures. The Box on the VAT projections in the recent report is an example. For the future, looking at the macroeconomic implications of the mix of adjustment measures would be consistent with our mandate. The ongoing international debate on the issue shows that it is far from a settled area, however.

@Joseph
Let them rot ………. we need to put all available fixed capital investment into linking rational nodal centres with the minimum of daily energy inputs
(rail) – these activities appear non profitable at the moment as the monetary environment is entirely artifical, as its function is to channel the remaining capital to the core.
But this monetory cocoon will not last forever.
We have declining populations withen many of the traditional city boundary districts of Cork , Waterford , Wexford etc.
Meanwhile even relatively well connected Burbs have many vacant houses.
Living in the outer burbs and sub rural areas needs to be made more expensive ( however it really won’t work in the euro monetory envoirment)

We need a radical transport strategy for Irish Transport conditions of dispersed populations in even “rational” settlements.
The Irish goverment should be in talks with Alstrom to create a Irish gauge train suitable for Irish conditions.
In my opinion a major order for Diesel X73500s (it can operate a either 1,2 or 3 carriage unit) in conjunction with at the very least a constant Midleton scale rail construction operation is desperately needed.
http://www.youtube.com/watch?v=1OnrcAbgg54

We are going to get constant declines of the Irish private car fleet from now on – we should be making preparations.
Outfit the Foynes / Castlemungret line to passenger route specifications – we need a Port cargo line there anyway … so if you are going to do a job do it properly and make it a multi function line that can be used for suburban west Limerick services + a summer service to the Tourist town of Adare and the beautiful & historically interesting town of Askeaton.

http://www.youtube.com/watch?v=FehvgB4b1p0

Private Cars have never paid for themselves in their entire History , I find it amusing that this capital waste is tolerated while Labour gets screwed.

Its a deep sickness.

@John McH

As you say John there is a great deal of debate among economists and huge uncertainty about austerity vs fiscal stimulus.

At some point – probably within five years, it is possible that the question will be effectively resolved via the full-size experiments being conducted. I say effectively, because there will always be ideologues and their wacko academic supporters who will deny the obvious.

Imagine this – and it is a genuine question, not a rhetorical point. Four years hence, there is clear evidence that Austerity was the wrong choice, and that more or less full-on Keynesianism was the right one. This is accepted by private sector financial and market analysts, and the bond markets of states that engage in sensible versions of it are the destination of choice for investors.

There is at that point a very weak periphery, dependent on a core which is still insistent that ‘austerity’ is the answer. Ireland and the rest have ratified the Fiscal Compact Treaty, and it is part of the German constitution.

a) What happens then?
b) Would it have been worth it for the guarantee of ESM access and the distant possibility of Eurobonds?

In contrast RBS are more upbeat…
“In a generally upbeat report, credit strategists at Royal Bank of Scotland said fears that senior bank debt face losses are “overdone”.

Irish banks, it said, had the least exposure to their sovereign’s assets, compared with other so-called peripheral countries.

“Unlike those in Spain, Italy, Portugal and Greece, the Irish banks have not increased their exposure to sovereign bonds” since the ECB began offering three-year loans, the bank said.”

It added that Ireland faces years of austerity as it refocuses on core strengths: competitiveness, foreign investment and exports.”

But you would have to wonder about banks that got things incredibly wrong commenting on other banks equally culpable.

Interesting that our banks didn’t load up on our sovereign debt with the LTRO
I wonder why?

In todays IT Dan O’Brien points to Baltic states as examples of countries where recessions and austerity policies have led to growth.

“Start with the austerity story. Latvia, Lithuania and Estonia suffered even deeper depressions than Ireland and even more brutal austerity. Now they are surging ahead.

Estonia’s GDP grew by a blistering 7.6 per cent last year, Latvia’s by 5.5 per cent and Lithuania’s by 5.9 per cent. The three were – by a considerable distance – the fastest growing economies in the developed world.”

http://www.irishtimes.com/newspaper/finance/2012/0406/1224314438685.html

http://online.wsj.com/article/SB10001424052702303299604577327322799986772.html?mod=googlenews_wsj

Is this man on drugs?

@ Ordinary Man

He must be on something…maybe the sauce.

He obviously didn’t read Herr Draghi’s comments in recent days… pay it all back, on time and honor your commitments.

Or maybe that is the second bailout…58,000,000,000. Wow

@Bond Eoin Bond
Thanks for clarification. Some error! RBS were flogging BOI senior unsecured bonds yielding 8.45% due 2013 in that report. Timescale looks ok as the underlying problems are unlikely to surface that quickly. Might be worth a punt.
Of course Spain could erupt before then.

@Ordinary Man

Yeah – he is toked to the gills … on power (small ‘p’) …. he could sell out our grandchildren with a smile – most worringly, he mightn’t even understand that he was doing so.

@ Paul W
I cannot see Jens agreeing with Mario to go that route. Whatever about the US going for more QE (dire job creation figures today) it is peculiar that the trillions in previous and existing programmes hasn’t stoked inflation. Maybe it is because the money was mostly used to buy toxic paper.
Interesting article on the toxic stuff..
http://www.guardian.co.uk/commentisfree/joris-luyendijk-banking-blog/2012/apr/05/former-head-structured-credit-voices-finance

@John McHale

“Maybe markets will come to believe that countries that run up larger debts stimulating their economies are more creditworthy. But I doubt it.”

How come then that Japan, the UK and the USA can sell vast quantities of bonds and have strong currencies having spent trillions (billions in the UK) on stimulating their economies or saving them from meltdown.
Is it only a Eurozone Phenomenon.

@cet. par.

Good question.

I think an aspect of the euro zone crisis that has taken many by surprise is that structural vulnerability to “runs” on sovereign debt in a monetary union. The importance of having a central bank as bill payer of last resort has been revealed to be critical to a country’s creditworthiness. The constraint seems to bind esspecially tightly when there isn’t a relatively captive domestic base of investors in domestically issued debt.

@ DOCM Agree with that. There needs to be consolidation to reduce and hopefully eliminate the deficit. Lots of pain in there. However, my point is that rectifying Ireland’s insolvency is the important starting point before one begins that deficit process i.e. before you begin unwinding the counter-cyclical stimulus inherent in the deficit.

Not sure what John McHale thinks “creditworthiness” is….However, by definition (in credit terms), you cannot ever be creditworthy if you are insolvent. Period. How John considers Ireland to be capable of creditworthiness given current levels of debt baffles me. On any credit measure, Ireland is insolvent – independently incapable of paying its bills as they fall due, with no material improvement likely in that outlook for the foreseeable future.

@Paul W

Maybe I misunderstand you, but your argument seems to be that Ireland is simply insolvent given the current level of debt. Here I have some sympathy with DOCM. Given current levels of public sector pay, welfare rates and tax levels (in absolute terms and relative to European norms) we have the scope to substantially improve the primary balance and achieve debt sustainability. Now I certainly do agree that the adjustments should take place in a phased way to limit adverse affects on growth, but we are only insolvent to the extent there is not the political capacity to bring our incomes into line with what we can afford to pay.

Unfortunately, I think it is fantasty to think that we would continue to get support based on current conditions if we decided to default in the belief that we could keep paying ourselves as we are.

On your second comment, the experience with Italy and Spain last year shows how investors flee once they fear other investors will flee. The danger is higher the larger is the debt and the shorter the average maturity (hence the value of restructuring the promissory note). Moreover, the danger of falling into this “bad equilibrium” appears to be considerably lower when a country has its own central bank. In extremis, the central bank can print money to pay off creditors (even at the cost of higher inflation). This very capacity can prevent the bad expectations forming in the first place. With large debts that need to be rolled over, creditworthiness is fragile.

This points to the need for a strengthened lender of last function within the monetary union. This is why it is so important to strengthen the “firewalls” and for the ECB to be willing to provide direct and indirect support to sovereigns. I notice that some commenters like to write in pejorative terms about the “readers of Bild”. But is so surprising that countries taking on the largest contingent liabilities in such mutual support arrangements would want some assurance that they won’t be played for fools? Imagine if the shoe was on the other foot.

@John McHale

“This is why it is so important to strengthen the “firewalls” and for the ECB to be willing to provide direct and indirect support to sovereigns”

Isn’t the fatal design flaw in the monetary union the unwillingness and inability of the ECB to provide direct support for sovereigns. It leaves speculators able to pick off any vulnerable sovereign in the knowledge that the ECB is precluded from “monetary financing” sovereigns. The indirect support ( LTRO) has been observed as being of dubious legality and as a tool is now being called into question..ie. finding its way back on deposit at the ECB. It seems to have worked for a very limited time and as observed (by Grumpy, I think) supports sovereign bonds only within the 3 year timespan. As such it is creating the mother of all refinancing requirement in 2015.

Surely the answer must be to change the rules under which the ECB can operate rather than firewalls requiring complex agreements (with the concurrence of the Bundestag) any time a crisis occurs.

@all

Kenneth Rogoff … on something lacking in the remit of the ECB

Maurice Obstfeld pointed out that, in addition to fiscal transfers, a currency union needs clearly defined rules for the lender of last resort. Otherwise, bank runs and debt panics will be rampant. Obstfeld had in mind a bailout mechanism for banks, but it is now abundantly clear that one also needs a lender of last resort and a bankruptcy mechanism for states and municipalities.

http://www.project-syndicate.org/commentary/a-centerless-euro-cannot-hold

NO evidence whatsoever that present Deutsche focus of ECB will be subject to political or treaty change ….

@John McHale

I’m back to the ‘HOW’ of fiscal consolidation ….

‘… public sector pay, welfare rates and tax levels …

Ireland is under-taxed in EU terms – 3rd tax band; cap on upper levels of public sector pay; no properly thought out property tax; a simplistic penchant for universals and regressvies; no land tax; no wealth tax; closed shops in numerous professional areas with restricted entry and odious charges; shortage in certain professional areas such as hospital consultants; no proper career structure for junior hospital doctors; tax breaks galore for upper-echelons; a culture of entitlement in certain upper echelons and zero to minor penalties for massive white collar crimes; etc and an essentially middle class welfare state that consistently funnels from the working and underclass; and no political will to take on powerful goughing vested interests ….

DOD,
We will have to cut the marginal rate of tax & USC by a few points as we are now out of line with the UK. At the same time we will have to raise taxes on the average worker and bring in a property tax. Prepare for howls of protest from the left over regressive policies. Universal payments are going to have to go as well.

An important requirement in discussing alternative fiscal pathways is to draw on empirical data and modelling difficult as this is in the light of recent experience since 2008. All concerned need to spell out assumptions and component elements. Calls for further tightening of fiscal screws need to be proofed against empirical reality especially where – to some extent – missing fiscal targets is linked to falling domestic demand which in turn is linked to fiscal austerity. Further work is needed.

In haste! There is a babel of voices on what should or not be done.
At official level, spin always trumps a serious assessment of the challenges say five years ahead.

Dan O’Brien cites the Baltics and in contrast Ireland is on the slow boat to China.

I believe that it would be useful to explore a scenario of 5 years ahead with no growth.

The fact that more than 40% of owner-occupiers have no mortgage compared with 12% in Sweden suggests that there is a big disparity between wealth/income in the society.

The sustainable living standard is lower than we believe and to inform policy choices we have to get a handle on what can be afforded.

Sections of the private sector have had huge drops in income but after another bleak US jobs report, talking up recovery prospects in Ireland avoids having to look at unpalatable choices.

The public pay and pensions bill in 2011 at €17bn, was about €1bn higher than in 2006 — the peak year of the boom. With a growing dependency population, there are other areas of high spending that cannot be maintained in a decade of no growth and low growth that can benefit the domestic economy.

@ All

The view from Berlin! (Google Translate does a good job).

http://www.zeit.de/wirtschaft/2012-04/schaeuble-eurokrise-zahlungen

Many will find Schaeuble’s view of the crisis one-sided. However, this does not help very much as “he who pays the piper calls the tune”.

The question raised is whether the current approach of the government – against the background of the recent comments by Draghi and the position of Germany as stated by Scaeuble – is firmly grounded in reality. Time will tell.

Who are these undertaxed rich people? I think we should be told.

@ Hoganmahew

Anyone over 100kpa. Starting with that prat mentioned above.

The Eurozone crisis from abroad, Paul Krugman in fine form.

Monetary Mandate Mischief

One of the remarkable things about the ongoing economic crisis is the way so many people have responded to events by adopting doctrines that would magnify our problems. The woes of Spain and Ireland demonstrate that balanced budgets and low debt in good times offer no protection against crisis, so European leaders make tougher fiscal rules the core of their agenda. The broader euro crisis demonstrates the downside of fixed exchange rates and inflexible monetary policy, so the right doubles down on the gold standard. The financial meltdown demonstrates the need for effective bank regulation; the right demands even less government intervention.

In homage one of the remarkable things about the current version of political right in Europe is that , unlike the political left who have been forced into a morass of introspection after the right flanked them through European institutions, they have come to believe that some very radical policies with so far awful policy consequences are in fact common sense – fortitude and self belief have become the permanent standins for examination and reason.

For a terrific example see Dan O’Brien’s faux balanced endorsement of the FAC report here where he comes up with this already comprehensively debunked factoid in order to support the myth of expansionary fiscal contraction.

At the other extreme in the debate are the fiscal stimulators who say things such as “no economy has ever cut its way out of recession” or “austerity is not working because it never works”.

This position is even easier to dismiss. Last year, the fastest-growing economies in the developed world were the Baltic trio of Estonia, Latvia and Lithuania.

Read the thread on Krugman’s post to see just how successful the Baltic austerity laboratory has been, or you could read this article at counter punch:

http://www.counterpunch.org/2011/09/19/the-pillaging-of-latvia/

I am not sure whether Dan O’Brien truly believes what he is writing or whether like the rest of the establishment media he is trying to deliver Ireland for his fellow neoliberals in greater Eurozoneland but it is shabby, shabby stuff.

Sunday Observer

“Brussels’ austerity drive must be stopped if eurozone is to survive”

“Even this need not be a drama, if three preconditions are met. The first is that policymakers both in Spain and at the eurozone level learn lessons from the botched rescues of the past two and a half years. Experience shows that there is a need to move decisively and with speed. The second condition is that there are enough bailout funds available to the EU and the IMF to cope with the demands of Europe’s fourth-biggest economy.

“Finally, there has to be a recognition, belatedly, that Spain’s deficit-reduction programme needs growth more than austerity. The war chest available to Europe and the IMF is probably big enough to cope with Spain. But the adamantine belief in cutting at all costs shows that lessons still need to be learned.”

http://www.guardian.co.uk/business/2012/apr/08/eurozone-austerity-drive-spain?newsfeed=true

Gavin Kostick

Enyoyed your Humbledore story, and sorry to miss the Tiny Plays. Bali o dDhia ar an obair. As they say down in the Royal County, its not over til its over, so keep hurling.

@kieran follows me slightly off thread…

I did a double take when o’brien cited latvia as a success story, that’s certainly contrary to what I’ve read. there’s a rather good report here:

Thanks for that link Kieran, Latvia’s story is heartbreaking and has key issues common with Irelands (the influence of the international banking lobby on national policy, a centre right “EPP compatible” administration, the Euro lobby’s indifference to human suffering) so Dan O’Brien mentioning it could indicate the kind of “success” he sees in Ireland’s strong austerity, strong Euro, weak left, future.

That is not fair of me – Dan O’Brien may well think that following the same policies will not have the same consequences in two different localities and as with most of the financial sector sympathetic right European establishment he is merely searching desperately for evidence to support his case. It is not unlike mentioning fringe figures like Alesina (favourite economist of George W Bush’s favourite economist – how’s that for a recommendation!).

I have some sympathy, it can not be easy looking for intellectual backing or historical evidence to support the current Eurozone policies. In the mainstream economic world outside Europe the majority of economists with credibility remaining after the global financial crisis think that EMU and austerity crazed Europe have lost it completely and are the victims of either a cult or a conspiracy (I will display balance and say “Both.”).

If the the united right alliance lobbying for the Fiscal Compact front have set out to frighten me they have done it.

To me it seems that the Fiscal Compact and the currently dominant ideology in the Eurozone establishment is at least as politically radical and dangerous as any in the last thirty five years, and possibly much longer than that. All dressed up in the language of balanced household budgets.

@Kieran

Hi shay, personally im not much of a fan of Dan and he’s hardly the worse of them at our esteemed paper of record.

The worst is a pretty harsh measure at the Irish Times these days, and Dan O’Brien seems as reasonable as they come. I still have difficulty respecting anyone who tries to claim that the FC has a valid economic rationale as opposed to a pure political one (keeping our heads below the Eurozone parapet, hope that Spain, Portugal or Greece does the dirty work for us).

Really i dont know what to think but it seems to me that treaty or no we’re in for long term grinding austerity as a ward of the EU and there’s probably not much we can do about it. Unless we go rogue altogether, pull out of the euro etc which would certainly be way worse. That being said I do intend to vote no.

A No to the Fiscal Compact may just be the lesser of two evils but as a practising homo moralitas I am all about the evil minimization.

hey shay i responded last night but my comment seems to have disappeared. Personally Im going to vote no just for the emotional satisfaction. Of course there’s no substantive reason to vote yes and to the extent that the treaty just furthers the narrative that the entire of the problem was irresponsible government spending it probably actually hurts our interests.

However afaic it doesnt really make a difference, its not like we can do QE or a deficit funded stimulus in any case. It seems to be like the best that can be hoped for is an equitable distribution of suffering. And if we do get out from under this then I think we’d be wise to embrace “Hard Keynesianism”, which from what i hear is pretty much the mentality in latin american and asia after there experiences with bail programs etc.